Bank wont let me BRRRR. HELOC ONLY. HELP!

28 Replies

I have a home i bought and nearly finished rehab. Started doing my paperwork to do a cash out refinance and back says i have to treat this as a HOME EQUITY loan. It still is a 80%ltv but max is 20year. They said i needed to have additional Homesteads for it to be a Cash Out refinance. 

What do you all think? I'm shopping around to see where they can do a 90%LTV but have had no luck. Not even at the credit unions. Any Advice ?

@Aaron K. @Caleb Heimsoth Its a home equity loan. Idk about the terms though. They are offering me an ARM 5/1 20year. Interest rate for 6.6% right now, and can go up as high as 12% at year 8.

Any advice on this ? should i take it or run. I think most lenders on these type of loans might do the same and i dont want to take a huge credit inquiry hit.

@Greg H. Any thoughts on this since you know the markets here in Texas ? Yes LTV max on home equity is 80%ltv but the interest on this ARM seems very high. I was hoping for a fixed rate.

Originally posted by @Maugno M. :

@Aaron K. @Caleb Heimsoth Its a home equity loan. Idk about the terms though. They are offering me an ARM 5/1 20year. Interest rate for 6.6% right now, and can go up as high as 12% at year 8.

Any advice on this ? should i take it or run. I think most lenders on these type of loans might do the same and i dont want to take a huge credit inquiry hit.

@Greg H. Any thoughts on this since you know the markets here in Texas ? Yes LTV max on home equity is 80%ltv but the interest on this ARM seems very high. I was hoping for a fixed rate.

I wouldn't do this. Call a conventional bank and do a cash out refinance, not a HELOC.

Interest rates will be 6.5ish percent for 30 year fixed by end of next year.  Do you really want to be paying 8 percent interest in a few years? I wouldn’t 

Lender says they "don’t have a fixed rate except secondary market and the loan amount would need to be over $150,000"

@Caleb Heimsoth This is a cash out home equity loan. Not a HELOC. I was mistaken or understood wrong. Lender cleared that up for me. Its a conventional bank with a conventinal mortgage.

Originally posted by @Maugno M. :

Lender says they "don’t have a fixed rate except secondary market and the loan amount would need to be over $150,000"

@Caleb Heimsoth This is a cash out home equity loan. Not a HELOC. I was mistaken or understood wrong. Lender cleared that up for me. Its a conventional bank with a conventinal mortgage.

Okay well it’s good it’s not a heloc but it doesn’t change the terms.  I would not don these terms.  Do you have to much debt or something?

You want a 30 year fixed rate, likely around 5.5 percent currently.  

You will not get 90% LTV in a refi or heloc. The only way to get a mortgage for 80% with additional cash out is to use point.com or unison or similar “equity partnerships” loans

@Caleb Heimsoth Thats what i wanted from the start a fixed 30 yr rate. My credit score came back at 696 which isnt horrible. I do have debt. Im at about 60k(student loans/Personal loan i used to buy this property) But with the proceeds from this i wanted to clear all my debt up. Thats the only option with this bank i guess.

Originally posted by @Maugno M. :

@Caleb Heimsoth Thats what i wanted from the start a fixed 30 yr rate. My credit score came back at 696 which isnt horrible. I do have debt. Im at about 60k(student loans/Personal loan i used to buy this property) But with the proceeds from this i wanted to clear all my debt up. Thats the only option with this bank i guess.

Id try a different bank.  Your credit score is probably hindering you some.  Most banks want to see above 700.  696 isn’t awful but it’s also not great.  It’s just average.  

Call 20 other banks and if you still don’t have one, then I’d go with whatever the best option is, get your credit score up and then refinance again 6-12 months from now.

Originally posted by @Maugno M. :

@Caleb Heimsoth What do you think about mortgage companies? I'm looking into one now that say they might be able to help me. Guild Mortgage.

Yeah I’ve used one of those before to purchase.  I found another bank that had lower fees and better customer service so I’ve used them the last two properties and will be using them again likely for the next one.  Then I’ll have hit to loan limit for that bank k believe  

@caleb heimsoth We'll see what happens. i hope it works out. i wanted the money to move on to my next deal. But gotta play it safe.

@Greg H. Any thoughts on this since you know the markets here in Texas ? Yes LTV max on home equity is 80%ltv but the interest on this ARM seems very high. I was hoping for a fixed rate.

Hey @Maugno M. , try going through the commercial department at your local credit union. I recently had success doing so on a house I just BRRRR'd. My interest rate was 5.75% and my credit was in the 650 range at the time (high utilization since I purchased the property and financed repairs using a personal line of credit). Maybe you'll get more favorable terms if you let the lender payoff your debts with the equity opposed to writing you a check.

@Michael Enriquez Sounds good ima see all my options. But this bank im working with is pretty fair and right about mortgages so i might have to deal with this. It might not be a long term hold so i might sell as an exit strategy at the 5 year mark. 

@Maugno Mora Are you still eligible for traditional financing, aka Fannie Mae loans? You should be able to get 70-80% LTV on a fixed rate 30 year loan if you have no more than 4 loans and meet the debt to income requirements. I would keep talking to other banks. Be up front about your credit score and debt. Ask if you are eligible for a cash out refinance. If they say no, then ask why and really try to understand why you are disqualified. It could be a seasoning period or some other reason, but most loan officers will explain it to you but you have to ask the right questions.

@Maugno M. you should talk to a minimum of 3 banks, even if they are fair. You should compare rates and terms between them. It may be how you are holding title? LLC vs Personal. Ask for a portfolio type cash-out loan product. Just did one last month at 5.5%, 30-yr fixed, 80% LTV. Required quit claiming to my personal name.
@Michael Enriquez I'm in this same situation, financed the rehab with personal credit line, Credit dropped. Did you have any conventional options for refi or going commercial was your only route? What were the terms you eventually settled on?
Originally posted by @Maugno M. :

I have a home i bought and nearly finished rehab. Started doing my paperwork to do a cash out refinance and back says i have to treat this as a HOME EQUITY loan. It still is a 80%ltv but max is 20year. They said i needed to have additional Homesteads for it to be a Cash Out refinance. 

What do you all think? I'm shopping around to see where they can do a 90%LTV but have had no luck. Not even at the credit unions. Any Advice ?

I mean, 80LTV/20yr on a BRRR deal on actual appraised value is not that terrible. I'd just sell that sucker, take the equity you made as profit, and throw it down on a more stable MFR that qualified for an 80%/25yr commercial loan.

I have NOOOOO idea why everyone holds BRRR deals in such high regard on BP! I've done a couple and all they do is keep my money tied up for way too long. The couple of bucks I save on equity position are traded for a crappy loan product, a ton of effort and time, and lots and lots of missed opportunity to be earning cash flow if I had used that cash to buy a couple higher yield properties with traditional financing.


One more thing. Banks hate BRRR deals. They do NOT like to lend based on ARV when you bought the property for half of that months before and did a basic remodel. A lot of them will pin you to 75% LTV based on total purchase+repair cost, not ARV. Then you've gotta get the sucker to appraise, which may vary from market to market but I've spoken to a lot of investors that have issues with this.

I would BRRR again under one condition and one condition only- the deal was BIG. Big is different for everyone of course, but for me I'm talking 1.5M-2M ARV, and I would use as much investor capital as possible for the purchase and rehab in exchange for a slice of equity to supplement their cash flow on the back end.

Originally posted by @Elliott Elkhoury :


One more thing. Banks hate BRRR deals. They do NOT like to lend based on ARV when you bought the property for half of that months before and did a basic remodel. A lot of them will pin you to 75% LTV based on total purchase+repair cost, not ARV. Then you've gotta get the sucker to appraise, which may vary from market to market but I've spoken to a lot of investors that have issues with this.

If your BRRRR comps and ARV is based on recent sold comps, why would they not give you 75/80% based on said comps? Doesn't sound like a good lender partner to me. Not sure why you " hatin' " so much on this method lol If you can make all (at least 90-95%) of your money back in 6-12 months, what kind of ROI is that? I wouldn't consider that "locking" your cash up, as long as you have a solid exit plan.

@Victor S. the hate is real!!!


LOL I work with investors that love this method often, I don't mean to throw that much shade on it. It just comes down to my investment philosophy- BRRR tends to hamper scalability on little deals like SFR's and duplexes.

Trading a lot of time to have your money back, and if your seed fund allows you to do one BRRR a year, sure you're never going to have relinquished your seed fund, but you're also only going to have a measly couple bucks of cash flow generated per year (after true expenses with reserves included). This is cool if you're looking to build a retirement portfolio, but not enough to get you into the real estate full time. After 10 years in the business and 10 properties cash flow might be 3k-5k per month. Way too much work for that kind of money.

Totally goal dependent, I neglected to mention that in my first post. You have a point.

Thanks for the info on this post. I am in the same situation. I just finished a rehab and am trying to refi with no loan on the SFH 3/1. First Credit Union said they don't lend for anything other than for rehab costs. I told them that it was already done. I tried Lending Tree who said that the loan is not big enough for them. I will be checking with a local bank in the morning that an investor told me they use.