HELOC Question

6 Replies

I inherited a house and have a question concerning obtaining a HELOC.

The house is in great condition. It was my grandmother's home and I plan to keep it as a rental. When doing a search on her debt, I found she had taken a 100K ELOC against the house. Two others were previously taken but were paid in full as I saw a full reconveyance for the two. Thus, the one 100k ELOC is still open. She passed in 2011. The bank (B of A) hasn't issued any NOD. I would like to pay it all back through the rental income but I need to make a few small repairs and clean it up.

I was wondering...is it possible to obtain an additional HELOC through a different lender given the house is worth 240K. I would to use 40K for repairs. After repairs, I know I can rent it for it $1200, allowing me to pay back the first ELOC while paying my second HELOC which would be in my name. BTW.... The original 100k ELOC is under my grandmother's name. The house is now under my name.

I would get a HELOC in your name or a new loan and wipe out your grandmothers completely. If the deed is in your name does BofA have a position on it? You could obtain a new HELOC to pay off hers and pull out cash to make repairs. Just a note on qualifying for HELOC's they are a consumer product. My experience with a interest only HELOC I looked into, they require me to qualify for the loan as if it was on a very short amortization even though my payment was going to be 1/3 or 1/4 of what they made me qualify for.

I'm curious to know, what lender do you know of who is offering a HELOC product on a non owner-occupied property? You mentioned that BofA had issued the existing one, but who would you be going through to take another?

Also, from what I've seen, if there is no other outstanding debt on the property, most banks that do offer theses type of products would have no issue as long as the combined LTV is under 70 or 80%.

Originally posted by @Justin Thompson :

Just a note on qualifying for HELOC's they are a consumer product.

Please help me understand this...Are HELOCs only for owner occupied properties?

What do other investors do when they have equity in a property and need fix up money?

@Kevin Wright , we closed on an investment property Heloc a few months ago with a credit union in Florida, where the property is located. We have Helocs on several of our investment properties. TD Bank does them as well. I actually spoke to them today, and they have a Heloc product for 75% LTV, $99 application fee, and a $50 annual maintenance fee (waived depending on the amount of the line).

If you took out that $40k HELOC in your own name, you'd be at a ~58%LTV, which is below the typical threshold for most HELOC's. (100 original HELOC + additional 40k = 140k HELOC/240k Appraised).

Non-owner occupied is just a different applicant to a HELOC lender, not an automatic DQ by any means. A quick google search for "HELOC non-owner occupied" links to several banks that are willing to provide HELOC's to non-owner occupants. Just be cognizant of the terms of the loan ( as always) and you will be fine. (PS, I would link to the banks that I referenced, but I'm still new-ish to the forum, and I'm not aware of the rules of linking to stuff yet. A search for the exact google string I referenced above will give you those results....no affiliation).

I would definitely say it is a good idea for your situation. If the house has a current valuation of $240k as you indicated above, then you also have to think that your $40k HELOC has the potential to value-add equity into your property, quite apart from its ability to bring in your desired rental terms. If your plan is to keep it as a rental property, I would suggest doing some market research for your area to see if you could perhaps command higher rents as $1200/mo is a .5% rent return on a $240k market value. If your market just doesn't command those rents, that is of course fine, but speak to some folks, and see if it is possible to get higher rents on the property. You might be better off putting that $40k into the property, selling it (because of the value-add), and taking that money elsewhere where you can command a higher percentage rent with respect to ARV. Of course do the analysis to make sure that there is the possibility of value-add equity before spending the money if you plan to sell it.

Know your options, and work a plan. There are so many ways to make money in real estate, as long as you have a plan and work it. Good luck!

Thanks! @Aly L

I've got mine in Hollywood, FL. I'll have to check with TD and some of the local credit unions.  

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