Heloc or cash out refinance???

Question

I'm looking to purchase my second property in the next (2-6)months. I have about (100K) in equity in my current home, and I was looking to use this for my down payment. I was going to use a HELOC, because I did not want to lose my current interest rate (2.6%). I have talked to a few lenders and none of them do HELOCS. I have got a quote for a refinance with a conventional loan at (3.6%) locked for (5years) then adjusts. My current loan is FHA so I figured, I would go to conventional and get rid of the PMI.

My question is, is it possible to use a FHA loan for a vacation home loan/non-primary residence. I would like to use a FHA loan, so I could get the lower down payment.

Any advice/tips is greatly appreciated.

,Thanks!!!!

My question is, is it possible to use a FHA loan for a vacation home loan/non-primary residence. I would like to use a FHA loan, so I could get the lower down payment.

Any advice/tips is greatly appreciated.

,Thanks!!!!

Jeremy Taggart · Answer

@Chad Jackson FHA can only be owner occupied. I would probably refinance your current FHA into a conventional, and then use the FHA again for a house hack. Assuming you are able to house hack in your current situation. It sucks to refi out of the 2.6% but I think the return you will get using the FHA again would make it worth it. That or you can get a HELOC and keep the current FHA (lenders should go to 90% LTV in the 2nd position on a HELOC) and use that money for a down payment on a 10% down 2nd home/vacation home loan if that's what you are set on purchasing next.

Nathan Grabau · Answer

Low down payment FHA loans cannot be used for anything but a primary residence. How does the 1% interest rate increase compare to removing PMI? Quorum Credit Union currently has a 90% LTV Heloc that offers an interest only prime plus .99%. Currently that makes the rate 4.49%.(10 year interest only then 20 year amortization) It also allows you to pull up to 90% of your property value vs 80% on a cash out refi and has much lower closing costs than a refi. If you send me a DM I can share with you the application link. Before you apply it is pretty hard to get a hold of anyone that knows anything, but after you apply you get assigned a real person who has been very responsive to me. I am closing on my second HELOC with them on Saturday so I can personally vouch for them.

Jeremy Taggart · Answer

@Chad Jackson you should be able to just refinance your current FHA into a regular investor conventional loan at 70-80% LTV and pay off that current mortgage. Then get the FHA back. It's tough to beat the FHA on a 2-4 unit since it's such a low down payment.

Chad Jackson · Answer

@Jeremy Taggart

I agree, I think I'm leaning more towards the refinance and then use an FHA cause of the low down payment.

If I do go that route

What do I have to do with the conventional loan to change that property to a vacation home/ non-primary.

Kevin Woodard · Answer

Hi Chad, you won't be able to do an FHA on a non-primary residence. However, I would look at the terms of both and weigh your options for what you want to do. We don't know what the rates will do, but historically speaking they are extremely low so the likelihood of the rate increasing is there. However, if you find a deal that cash-flows then the only concern would be you could've cash-flowed more with a better rate.

Regardless the rate will fluctuate as will prices. But the best time to buy real estate was 30 years ago and the next best time is 'now' (as long as you conduct the proper risk analysis!) Feel free to connect and let's see what we can plan out.

Jared Hottle · Answer

Not sure if this is possible in your exact situation but will any of them use the equity in your house as collateral for the downpayment on your next property. This keeps you from needing to cash-out refinance with a higher rate and you won't need to repay like you would a heloc. That is what I have done on a few of my investment properties but I have not done with a conventional or FHA mortgage so maybe that is not possible.

Heloc or cash out refinance???

Most Popular Reply