Heloc vs conventional mortgage for duplex

4 Replies

Hello BP Need some advice on the financing side of duplex property that I am ready to close before end of the year. I reached out to my lender for a conventional mortgage for the amount of $61k (purchase - 25%) and he quoted me 4.75% rate for 30 year with a closing cost of $4k. I have a Heloc (line of credit) where I can do a cash purchase without any of the closing costs. The Heloc is variable rate interest. Because of the small loan, the Lender fees is high and It tough to take a decision to move forward with loan or cash purchase. I would like to hear from you if you had such situations and how you handled

A HELOC is not a long-term solution. They usually require being renewed every 5 or 10 years and the bank can close your line at any time. If you your plan was a flip or short-term hold, then a HELOC might be an acceptable solution.

However, if your plan was to do a long-term hold, you will likely end up having to do two closings, one to buy, one to refinance.  

@Moncy Samuel I will echo exactly what @Greg Scott stated - HELOCs are short term solutions.  The variable rate might make this property un-affordable to you in the near future.  if you are buying and holding, 30 year fixed is the right way to go.  I will recommend to ask your lender to raise the rate to pay for some of the closing costs.  See what the numbers look like with that type of an option.  Usually with duplexes the cash flow is pretty good.  So a higher rate on such a low amount may not affect your cash flow so much but if it helps pay some of the costs, maybe that will get the deal back into the green for you.  Thanks!

Andrew Postell, Lender in Texas (#392627)
817-873-0621
Originally posted by @Moncy Samuel :
Hello BP

Need some advice on the financing side of duplex property that I am ready to close before end of the year.

I reached out to my lender for a conventional mortgage for the amount of $61k (purchase - 25%) and he quoted me 4.75% rate for 30 year with a closing cost of $4k.

I have a Heloc (line of credit) where I can do a cash purchase without any of the closing costs. The Heloc is variable rate interest.

Because of the small loan, the Lender fees is high and It tough to take a decision to move forward with loan or cash purchase.

I would like to hear from you if you had such situations and how you handled

Why not use your HELOC for the 25% deposit, and go with the 30 year loan for the rest?

ie. You don't need to use any of your own cash!

If it's a good deal, you should never have to leave any of your own cash in any deal, for long!

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