Good time to take out a HELOC ?

Question

Hello everyone !

I been thinking about taking out a HELOC on my current primary residence (Two family) . Is it a good idea ? Or should I look into other creative financing options? My two ideas are one to search/purchase another multi family unit and house hack. Or two make improvements to my current property. Such as upgrading the HVAC system in both units and other items that are value add and could increase rental income. I'm located in central NJ . Let me know your thoughts or idea's ! Thank you !

Jake Handler · Answer

Remember that when you take out a HELOC, and draw from it, it counts as "debt" to your DTI ratio. Might sound obvious but people often tend to forget this. So ask yourself (or a lender), can you take out a HELOC and still qualify for the next owner occupied purchase.

Shawn Mcenteer · Answer

Hi Matthew, seeing this post now. I commented on another thread you were...

To answer your question this very property by property. I have been house hacking for over a decade in NJ and have dozens of house hacking clients. I will say the majority of the time HVAC does not produce significant ROI unless you already have a forced air system and you can tie the AC portion into the existing duct work. Also something else to consider is having open attic space and basement space if you are over under. Side by side tend to be little more difficult.

I have used HELOC a few times on properties I was house hacking. It for sure tends to be best option. I am not a huge fan of REFI becuase it restarts the loan back to month 1 and for obvious reason if rates are higher. Happy to chat more and map out a plan with you, tough to give definitive answer without knowing more about situation but if you have the equity there tends to be a way to make HH number 2 happen.

Benjamin Aaker · Answer

It's really a win-win to get the line of credit set up. There's an appraisal and annual maintenance fee, but then the money is ready to go when you need it. Way faster than a mortgage. It's a small cost for ready access to money.

Denise Supplee · Answer

Hello Matthew,
HELOCs tend to have lower interest rates with greater payment flexibility. However, to purchase an investment property, a HELOAN may be better in order to leverage your assets, increase your income while sustaining your cash flow. Just make sure and run the numbers!

Kerry Baird · Answer

@Jake Handler, I'm thinking this is not so for a home equity loan, because the payments are fixed. Am I right? I have not used a second mortgage...just curious.

Matthew Platon · Answer

Hi Shawn,

Thank you for the information! Yeah I'm leaning towards the HELCO then REFI because of my low interest rate . HVAC isn't a major issue being that I live on the downstairs unit. But once I move out of this unit I would like to have that split so there's no issues of heat or air. Definitely would be interested in having a conversation if you have some availability!

Good time to take out a HELOC ?

Good time to take out a HELOC ?

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