HELOC purchase into a conventional refinance

[Reid McCutcheon]

Hi, Question on whether or not we should apply for another HELOC and how that may affect our ability to refinance into a conventional loan later on.

We currently have a $150000 HELOC based on a few rentals. A little over $100k is available. We owe $49k on that one due to having to dip into it after some renters destroyed a rental and it required a good chunk to get back up to speed. Current rate is 8.5%

We own a STR that we purchased for $450k at the beginning of 2022. Gross rents were $66k for the first year. We own it free and clear and were thinking about applying for another HELOC based on that property. I think I'd prefer the HELOC since, unlike a conventional loan, we don't have to pay anything on it if the money isn't in play. But I guess the concern is that with so much credit to our name, would it make it more difficult on our debt to income if we purchased a property with cash from the credit line to make for a quick and easy cash sale and then turned around and set it with a conventional fixed mortgage to quickly pay off the HELOC. Basically, would having an extra HELOC lessen our ability to get conventional funding?

[Albert Bui]

Quote from @Caroline Gerardo:

The maximum rate with maximum available loan amount principle and interest payment is used against your income to qualify. (not the balance and current rate)

How much expenses did you write off in 2022 against the STR income? Is year to date averaged 2023 greater than 2022 gross?

I've seen big banks assess a payment on a zero balance HELOC. Before union bank stopped wholesale they assessed even zero balance heloc's as 240 months 20 year fixed at the prevailing 30 year rate which was a huge hit, but fannie/freddie/conventiona/VA is still doing the min payment or zero if the HELOC is zero balance.

@Reid McCutcheon So the answer is generally no unless you're seeking a portfolio product or bank based product then yes they will assess you with a phantom payment or "hit," based on some etheral formula they have interally because they're scared to death you'll go out and max it all out  (is the vibe I get from bank products).

@Matthew Kwan

@Carlos Valencia