HELOC on Investment property?

Question

Hi,Does anyone know if it would be possible to close on an investment property with the 25% down bank minimum and then immediately take out a HELOC separately and dip below the original minimum threshold to make repairs? Thank you!

nick

Zach Taylor · Answer

@Nicholas Fulop You would need to get a great deal on the property such that when you go and get the HELOC you have built-in equity to leverage. For instance you put 25% down on a property purchased at $100k. You go to get a HELOC, and that lender appraises the property at $100k. They will loan on 75% LTV on that appraised value. Well that means they could loan you $75k, but they subtract what you owe on your first mortgage, which is $75k. So there is no available equity to leverage in that scenario. But if you bought the house for $50k and then your HELOC lender appraises it for $100k, then there is much more meat on the bone for you to leverage. Hope that helps.

Scott T Brady · Answer

equity lines usually have a limit of how much % of the property value they'll go up to, and my guess is that the % limit is lower on investment properties than primary residences.  If that's true, it'll probably be tough to find a lender that would give an equity line much above that 75% dtv you'd already have.

ThomasRoy Penland · Answer

I agree with everything said above.  There are other loans which will give you better LTV percentages, but they are fairly high at the moment, and I think those are the loans that will have to be renegociated in a few years.  Portfolio loans, Im not an expert, but I dont feel those are a good way to go right now un less you really know what you are doing.

HELOC on Investment property?

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