Are HELOCs Drying Up?

Buying & Selling Real Estate
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Are HELOCs Drying Up?

Christopher Stacy
Rental Property Investor · Redmond, WA · Member since 2018 · 11 posts · 2 votes

Folks, I am ready to start working on my next deal. I have two realtors that have setup an automatic MLS search, I have been scouring the internet sites and I even started networking with some like minded investors in the area. I have a sizable down payment, my credit score is over 800 and I am ready to pull the trigger on the next investment property. I have been running the numbers for the particular area and I am fairly confident that I can recognize a good deal when I see it. I can go the traditional mortgage route or position myself to be more aggressive. In this environment, I believe that an all cash offer can go a long way in negotiating terms, but I can't seem to find a lender that is providing HELOCS. I have tried USAA, Bank of America, Discover and Third Federal. All have informed me that they are not doing HELOCs on investment properties. I really do not want to go the hard money route, because I am doing buy and hold, so I am looking for options. I would appreciate it if you all can share your thoughts and insights. Thanks!

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Perry Farella
Lender · Chicago, IL · Member since 2016 · 189 posts · 153 votes
6y
Christopher, Just to add an alternative you may not know is around, there are conventional buy and hold or fix/flip rehab purchase loans available for Investors. They require a minimum 15% down payment, based on total of purchase price + rehab dollars needed. No prepayment penalty, rates based on personal credit scores, these loan are not commercial and not done for LLCs, just done for individuals. One is called Freddie Mac Choice Renovation and other is Fannie Mae HomeStyle renovation. I have details on how they work for Investors in my blog and if you look there is blog comparing them to hard Money from a couple years ago. Always happy to answer questions. Example: Buy at 100,000 and add in 50,000 for rehab plus a required 10% emergency reserve off the rehab budget or 5000 in this example = 155,000 total transaction. Then minimum 15% down is 23,250. This fully funds the rehab/purchase and gives an extra 10% cushion if needed, if never used it is subtracted from final loan size at completion. An option that may work for some in the right circumstances, especially a buy & hold but fix & flip works too. You have the security of a low rate loan amortized for 30 years and can sell or rent as needed with no pressure from a Hard Money lender to repay quickly and no experience needed in rehabbing with the lenders oversight. Appraisal is done prior to loan approval to be sure all the numbers work and future rent is projected automatically and you get 75% of that monthly rent as extra income to qualify for the loan size needed.
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  • Tom Shallcross
    Rental Property Investor · Chicago · Member since 2018 · 613 posts · 1k+ votes
    6y

    @Christopher Stacy - Unfortunately I doubt you'll find a lender to do a HELOC on an investment at this given time as some of the larger banks even stopped accepting HELOC applications on primary residence I don't see smaller community banks taking that on either.

    Not knowing the whole situation there's probably 4 other options for you:

    1. Cashout refi on the existing investment property. I'm not sure what your current rate/equity/cashflow situation is, but this would just be a less flexible route than your original HELOC option. I would assume you would be able to get somewhere around 70%-75% LTV, but would refer to a mortg broker who's more in-tune to this fluid environment.

    2. Private money - showcase the deal you've done and a sample model of what you're looking to purchase. Even if you don't get the money now, you're at least planting seeds and they may come around deal #3, and #4. 

    3. HML - the money is what it is. Account for the points/rate in your numbers and have adequate reserves and multiple exits

    4. Not sure how much rehab you're next deal will need, but there are traditional lenders that have what I consider a hybrid program. I just spoke with a friend at Guaranteed Rate here in Chicago who said they can close in 10 days on an investment property. Unlike HML, it's more traditional rates/terms, but you won't get any money for your rehab portion. Just whatever LTV of the purchase. If you're deal only has a minimal rehab, and you can afford to pay that out of pocket, this is a potential solution.

    Also, yes cash is great, but not every seller is swooned by the cash offer. Some default to highest price and there are other ways to make your offer more attractive like a higher escrow or waiving other contingencies. I'm not saying that's right or wrong for you, just throwing out options to get creative. 

    3Reply
  • Christopher Stacy
    OP
    Rental Property Investor · Redmond, WA · Member since 2018 · 11 posts · 2 votes
    6y

    Tom thanks for the insight. I am originally from Illinois so I will look into Guaranteed Rate. I did ask some of the lenders I mentioned above about cash out re-fi options and the story was the same. I may just default to traditional lending until the current situation stabilizes. They say that getting pre-qualified is better than pre-approval and in some cases, almost as effective as cash.

    0Reply
  • Tom Shallcross
    Rental Property Investor · Chicago · Member since 2018 · 613 posts · 1k+ votes
    6y

    Sounds good Christopher, feel free to DM me if you want to talk to my contact at GR directly.

    0Reply
  • Account Closed
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    6y

    @Christopher Stacy

    Call PenFed credit union. I just got a LOC on a rental property a week ago. 30 year fixed 4.75%. Their terms for a primary residence HELOC are probably a little better. It went through final underwriting a couple weeks ago.

    7Reply
  • Perry Farella
    Lender · Chicago, IL · Member since 2016 · 189 posts · 153 votes
    6y
    Christopher, Just to add an alternative you may not know is around, there are conventional buy and hold or fix/flip rehab purchase loans available for Investors. They require a minimum 15% down payment, based on total of purchase price + rehab dollars needed. No prepayment penalty, rates based on personal credit scores, these loan are not commercial and not done for LLCs, just done for individuals. One is called Freddie Mac Choice Renovation and other is Fannie Mae HomeStyle renovation. I have details on how they work for Investors in my blog and if you look there is blog comparing them to hard Money from a couple years ago. Always happy to answer questions. Example: Buy at 100,000 and add in 50,000 for rehab plus a required 10% emergency reserve off the rehab budget or 5000 in this example = 155,000 total transaction. Then minimum 15% down is 23,250. This fully funds the rehab/purchase and gives an extra 10% cushion if needed, if never used it is subtracted from final loan size at completion. An option that may work for some in the right circumstances, especially a buy & hold but fix & flip works too. You have the security of a low rate loan amortized for 30 years and can sell or rent as needed with no pressure from a Hard Money lender to repay quickly and no experience needed in rehabbing with the lenders oversight. Appraisal is done prior to loan approval to be sure all the numbers work and future rent is projected automatically and you get 75% of that monthly rent as extra income to qualify for the loan size needed.
    9Reply
  • Amy VergesBusiness Member
    Investor · Baton Rouge, LA · Member since 2014 · 128 posts · 138 votes
    6y

    @Christopher Stacy I second what @Jonathan Hulen said. I did a HELOC on an investment property with PenFed a couple years ago and now I'm doing my second one with them on another investment property. It's been a good & easy experience for me so far working with them.

    2Reply
  • Account Closed
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    6y
    Originally posted by @Amy Verges:

    @Christopher Stacy I second what @Jonathan Hulen said. I did a HELOC on an investment property with PenFed a couple years ago and now I'm doing my second one with them on another investment property. It's been a good & easy experience for me so far working with them.

    Yes I was surprised at how smooth it was. I plan on using them for everything from now on.  

    3Reply
  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    @Christopher Stacy did you try Pen Fed?

    0Reply
  • Noah Berson
    Real Estate Agent · Philadelphia, PA · Member since 2015 · 7 posts · 4 votes
    6y

    @Christopher Stacy Meridian Bank also does them. They max out at $49,999

    2Reply
  • David NutakorPro Member
    Rental Property Investor · Palmdale, CA · Member since 2016 · 122 posts · 88 votes
    6y

    @Christopher Stacy, try PenFed or www.figure.com

    1Reply
  • Christopher Stacy
    OP
    Rental Property Investor · Redmond, WA · Member since 2018 · 11 posts · 2 votes
    6y

    Great ideas folks! I really appreciate it. Perry, thanks for the Fannie/Freddie ideas. I am a PenFed member so I will look into them first. I haven't used them in a while since I switched to USAA, but I did leave my account open. Appreciate it!

    0Reply
  • Sean McCluskey
    Rental Property Investor · Newport Beach, CA · Member since 2017 · 218 posts · 138 votes
    6y

    @Christopher Stacy Did you already have an investment property that you want a HELOC on? Or would you be getting it on a primary, in order to buy your first investment?

    0Reply
  • Kyle Perez
    Los Angeles, CA · Member since 2018 · 4 posts · 1 vote
    6y

    @Sean McCluskey I have been following this thread. Mine is a primary residence I want to get a HELOC on.

    0Reply
  • Nick Ferrari
    Property Manager · Allentown, PA · Member since 2017 · 88 posts · 40 votes
    6y

    @Christopher Stacy

    Wells Fargo does Heloc's on investment properties but one important thing to note because of the fact that it's an investment property the terms are not favorable they only offer 60% 10 year. If you have a ton of equity in your investment property then it might work out but terms are always tougher on a HELOC that's an investment property. Good luck.

    0Reply
  • Christopher Stacy
    OP
    Rental Property Investor · Redmond, WA · Member since 2018 · 11 posts · 2 votes
    6y

    Thanks again team. I actually have 3 properties and only one with a mortgage. I have about $22k left on it and market price now shows that it is worth about $160k. I was thinking that it would be easier to get a HELOC on a property that still has a mortgage, but I guess I was wrong. I will look into Wells Fargo if PenFed doesn't pan out.

    0Reply
  • Account Closed
    Member since 2020 · 8 posts · 6 votes
    6y

    @Christopher Stacy We just signed for a 250k HELOC for exactly the reasons you said...to offer a quick "cash" deal on a property we find. But, it was on our primary home. It was with Iberia Bank in Atlanta. They are smaller-ish and might look at your overall picture, credit score, etc. and perhaps lend on an investment property. The big banks I think are for sure out.

    1Reply
  • Account Closed
    Member since 2020 · 8 posts · 6 votes
    6y

    @Christopher Stacy Oh, and our primary is paid off, along with another rental, and we owe about $60k on the 3rd rental, 4.25% fixed. Our HELOC is 2.99% so we are going to first use it to pay off the rental. Then pay off the HELOC by the end of the year and use it next year, when I think the deals will be everywhere. Our rate goes to prime -0.5% after 12 months. It cost $700 in closing which is much better than a cash out refi closing and you don't pay interest while you sit on it and wait.

    2Reply
  • Jeremy Galante
    Columbus, OH · Member since 2017 · 5 posts · 10 votes
    6y

    I was able to get one through Key Bank a few months ago just before all this crazyness started happening. Might try reaching out to a local branch if you have one and see.

    1Reply
  • Chris Miller
    Member since 2018 · 83 posts · 26 votes
    6y

    @Christopher Stacy. U can try quorum credit union. Penfed only does investment property helocs if u own 3 properties or less

    1Reply
  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    6y

    I've gleaned these lenders from the kind people on BP. I have used PenFed and TD Bank for HELOCs on investment property. Post back if you find another lender who serves you well, and I will add them to my list and pay it forward.

    Ridge Lending All in One, first position HELOC

    AFCU does 80% LTV on NOO. Utah

    Americafirst 80% LTV on noo 65% LTV Utah

    Arvest Bank AR, OK, AL, MO

    Bank of the west

    BB&T will loan on a rental portfolio

    BBVA Compass

    Boeing employee credit union

    California: Cal Coast Credit Union and Fremont Bank

    Citizens Bank -Minnesota, only in-state. Kyle Potswald

    Citizens first position HELOC

    CMG a financial 70% LTV

    East West Bank, up to 60% LTV with "no docs"

    Figure 80% on a rental, not in LLC

    First Florida Credit Union https://firstflorida.cumortgag...

    First Commonwealth

    Great Lakes Credit Union

    HSBC 70%, for premier clients only

    Huntington 75% LTV

    Hurst Lending and Insurance Investment property

    HELOC in Texas. No seasoning.

    Key Bank, FLorida flexible lender, HELOCs on second

    homes and rental properties. 90% LTV on primary.

    Merchants Bank MN See Pavel Ushakov

    PenFed - max 3 other properties, 89% LTV

    Regions- yes HELOC but no LOC

    SCCU Florida 70% LTV, 6.25% interest only, not LLC

    Signature Federal Credit Union 75% LTV

    Sound CU "non-owner occupied HELOC, capped at $150K and interest rates are prime + 2%, 3% or 4%, based on credit, not to exceed 70% ltv."

    S&T

    TCF Bank

    TD Bank

    TIAA Direct was EverBank

    Tower FCU, all states except TX, max 45 DTI, green card ok. Max of three rental properties. Automated appraisal.

    Trustco

    Union Bank, specializes in noo HELOC. KCMO, NE

    Union Bank, MUFG.

    US Bank

    Vectra Bank

    Wisdom from Ann Bellamy:

    I also never keep much cash in a bank account in the same bank where I have any mortgage. For example, I have a mortgage and operating account at Bank X for one of my businesses. I pull out most of the surplus cash from the operating account and put it in an account owned by the same company but in Bank Y. That way I get to determine how it's used, not the bank.

    4Reply
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