I want to get cash out for two small rentals for about 100K. One option is to get two home equity loan for $50K each and another option is to get one home equity line of credit for $100 K. Which one should I choose?
I read a lot but I know very little on the difference? I want to compare the Fee, rate and tax for the two options.
It all depends on what you plan to do with the money.
For us, I like the personal lines of credit because we take out the money we need and are therefore only paying interest on the loaned amount instead of the full amount with the loan.
Sounds like you need to talk with someone at your bank or credit union. That's the only way to get specifics. Fees and rates will vary considerably from bank to bank, and are also often dependent on your credit score.
Lines of credit are almost always a variable rate, and an equity loan is more likely a fixed rate; so if you are buying for a longterm hold and not planning to refinance that is something important to consider.
Bob, I was a banker for 20 years and used home equity lines of credit (HELOCs) very heavily with my clients in their investment endeavors. A loan is a one-time shot where you will usually pay a point to a point and a half on the money you borrower. It will usually be a fixed rate over a specific period of time (15 years, 30 years, etc). A HELOC is a variable rate instrument based usually on the Wall Street Journal Prime Rate (sometimes LIBOR). If there are annual fees, the HELOC can get expensive, but you can usually make interest only payments and go back to draw down more as you need it. There may be annual renewals, so unlike the Loan, you may have your line cut off and termed out. You have to look at how you plan to use the loan or line in order to determine which one is best for you. If you wish to reach out to me off line to talk it through, I'm happy to help. Now that I am managing note funds, I kind of miss helping customers one-on-one.
You are saying that the collateral for a home equity loan and/or home equity line of credit would be investment property. Generally, lenders require the collateral to be your residence, not a rental. Generally a HELOC will be in second position as well. This will be the biggest hurdle... finding a lender for a HELOC that allows NOO. The commercial side of a small bank may be a better option.