A couple of basic HELOC questions...

5 Replies

I just signed a Purchase Agreement for a SFH (rehab). It's a cash deal, but I'm looking to pull the equity out after closing via a HELOC. Would there be any specific timeframe after the purchase that a bank would require in order to grant a HELOC. Someone told me that banks typically require 30 days, and even then they will generally base the LTV on the purchase price. Also, do banks allow cosigners on HELOCs whose name are not on the deeds?

Misinformation is plentiful online, so I thought I'd ask the trusted BP crowd.

We've done this several times with Helocs, although the last one was 2 years ago. We didn't wait very long as I recall, but our waiting time was based on when we found the next purchase. We got 70% LTV and I believe it was based on the stated value. We used TD Bank. Again, it was 2 years ago, and things have likely changed.

Helocs can be applied for at the same time the 1st is originated provided there is equity to pull from. I have done quite a few piggy backs in my career.

@Mark Beekman - I recommend you read up on the Delayed Financing Exception for Cash Out Refinance and see if you qualify. You can likely get more money out than with a HELOC. You can apply immediately after closing the purchase - or later as long as you close the refi within 6 months of purchase close.

Here are the Fannie Mae rules:

https://www.fanniemae.com/content/guide/selling/b2...

Lenders sometimes apply a tighter set of rules and restrictions, so ask around at several lenders. 

You could more than likely immediately cash out refinance into a mortgage after purchasing. Mortgages have more favorable terms than HELOC's (longer amortization, lower payment) so this may be a better option if you have a set use for the funds.

However, HELOC's offer added flexibility that mortgages do not because you do not pay on them if you do not use the funds. This becomes especially handy if you're flipping homes with the cash.

Also, there are credit unions that offer HELOC's at 90% and even 100% of LTV which you will not be able to do with a traditional mortgage. Just some food for thought.

We did a cash out refi into a regular mortgage last year. We would have preferred to take a Heloc but we've hit our limit with investment condos in FL. Mortgages may have more favorable terms in the long run, but are much more expensive in the short term as far as up front costs. 

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