Is a second home worth it?

Question

SALUTE 🫡  BP Fam, I hope all is well this evening.. Question, is it hard to get a heloc on a second home (not an investment property) or is it treated like an investment property? Thanks in advance for all feedback🤙🏼.

Michael L. · Answer

@Dell Colvert, respect💯!

Dell Colvert · Answer

I would say yes. A second home is a bank if you have an “investors” mentality and the right capital partner behind you for leverage.

Michael L. · Answer

@Sasha Mohammed, thank you for that breakdown🫡.

Sasha Mohammed · Answer

a HELoan is a 2nd mortgage (its in 2nd lien position to your existing 1st) just like a HELOC.

HELOC stands for Home Equity Line Of Credit, its like a giant credit card where you can borrow and then pay back, and then borrow again. the key here is the 'borrow again' part.

HELoan is a Home Equity Loan.... its still in 2nd lien position, but you can only borrow against it one time. you cant go back and spend more on it even if you pay down the balance. that's what makes it "closed-ended" -- you cant continue to pull money out.

Michael L. · Answer

@Sasha Mohammed, thank you🤙🏼. By the way, what is a closed-ended 2nd? Also, what is a Heloan? An to be clear, for now I'm just learning how they work and how I can use them in different circumstances.

Michael L. · Answer

@Nicholas Ruscio, first, thanks for the info🤙🏼. Secondly, so you're saying that if you get a Heloc on a second home (not an investment), that they tend to give you a lesser loan to value?

Sasha Mohammed · Answer

do you need an actual HELOC where you can continue to draw funds? or would a closed-ended 2nd suffice?

HELOCs are hard to find these days even on primaries. they're out there, just tougher.

HELOANS, on the other hand, can be lent on primaries, 2nds, investment properties.... AND you have options on qualification methods: it doesnt necessarily have to be full doc.

catch is, you get one draw at closing, and the rest is a repayment period. can't borrow against it again without doing another refinance.

Nicholas Ruscio · Answer

Hi Michael, You can obtain a HELOC on a investment property and it is just as hard as getting a standard HELOC.Lenders generally have LTV limits for different types of properties. You may be able to borrow a higher percentage against your primary residence compared to a second home or investment property.How much equity do you have in the property? Please feel free to DM.