HELOC on a investment property

Private Lending & Conventional Mortgage Advice
2yFollow

HELOC on a investment property

David Marsh
Member since 2020 · 2 posts · 1 vote

Hello,

I have been trying to open up a HELOC on a investment property I have. The lender that has the mortgage doesn't do HELOCS on investment properties and I have reached out to a number of other lenders seeing if this is possible. So far I've only been told that I would need to do a second loan on the property and it would technically be a HELOC. Is it possible to open a HELOC for a rental?

Property is in Wisconsin and the only reason I haven't done a Cash out Refi is because the loan rate is at 3%

1Reply
82 views

Most Popular Reply

Jason WrayPro Member
Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
2y

David,

I run across this every day and you will find maybe 1-2 lenders still offering a heloc on an investment at 60-65% LTV. Problem is the rate will be 12-15% and that is not on a 30 year term its usually a 10-20YR term. So when you actually calculate having a 3% first mortgage and a 12-15% second/heloc its more expensive. You are better off doing a cash out refinance and taking a 7-8% since it offers a 30 year mortgage for the lower payment.

If you look at it for the long term you will have acquired another investment rental with positive cash flow and tax benefits. Then in 12-24 months you refinance and lower the rate back down to a reasonable rate you are ahead of the game.

"Marry the house, Date the Rate"...

[email protected]727-637-4289
2Reply
See this reply in the discussion

4 Replies

Jump to latestLatest
  • Jason WrayPro Member
    Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
    2y

    David,

    I run across this every day and you will find maybe 1-2 lenders still offering a heloc on an investment at 60-65% LTV. Problem is the rate will be 12-15% and that is not on a 30 year term its usually a 10-20YR term. So when you actually calculate having a 3% first mortgage and a 12-15% second/heloc its more expensive. You are better off doing a cash out refinance and taking a 7-8% since it offers a 30 year mortgage for the lower payment.

    If you look at it for the long term you will have acquired another investment rental with positive cash flow and tax benefits. Then in 12-24 months you refinance and lower the rate back down to a reasonable rate you are ahead of the game.

    "Marry the house, Date the Rate"...

    [email protected]727-637-4289
    2Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    2y

    The H in HELOC stands for HOME, what you are looking for is a business line of credit. And yes, terms will not be as good as a HELOC.

    1Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y

    I know of one, but it'll only work for single family properties that are in the name of an individual, not an entity. It requires a full draw at closing, but there's no prepayment penalty and you can take future draws. This product is unique in that it has a fixed rate, most HELOCs are variable rate. The appraisal is automated, so if the property was recently rehabbed and you're looking for an increased value, this program won't be a good fit - you'd need a full appraisal in that instance. 

    A closed end second is also an option like you've mentioned, but these do NOT allow future draws - it's a lump sum loan. 

    Hope that helps, feel free to connect. 

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
    View Page
    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free