HELOC and primary home loan

16 Replies

I'm am looking for a HELOC, so that I can have capital available for down payments/investing. I have never had a HELOC. One company wants to refi the conventional loan on my primary residence in combination with the HELOC, is that how it usually works?

@Felicia Bridges you can have a HELOC as the first lien/mortgage on your property. Often people use a HELOC as a second mortgage, utilizing the equity left after the first mortgage. When you run the numbers, that should tell you which option works best for you.

Sounds like they're just trying to get some extra business from you. It isn't necessary to refi. Maybe it would be to your advantage, I don't know, but don't do it just because they want to.

I'm looking to do the same thing by leveraging my equity in my home; however, I was advised to only use 25% of my equity for a down payment in the event of depreciation. I've never done one before either and actually just asked in a separate forum for advice before seeing your post. 

It does sound like the lender wants to just get more from you by having you do a refi, which will put money in their pocket with their fees, on top of you doing your HELOC. I was advised to do either one or the other. The advantage of the HELOC is that you can borrow the money as you please, vice the refi you'll just cash out and you pay it back with your mortgage regardless. Moreover, the disadvantage of the HELOC is it can have a low starting interest rate, with a variable monthly rate based on the outstanding balance, vice if you have a fixed rate loan when you refinance.

@Benjamin Manibog I submitted an application on lending tree and of course my phone started blowing up.

What I've discovered is that many lenders say they don't offer a HELOC. They want to talk to me about refi cash out or an equity loan which I don't want at this time.

I tried the lender that I have my home loan with, but I have to wait several more months prior to applying for a HELOC because I just refinanced in January and they only offer 80%.

I'll keep looking. I posed the question back to this loan officer of "are you able to offer the same amount in a HELOC without refinancing my primary loan?" I'm waiting for a response. They are offering 90/95% for the HELOC with what she presented.

I just don’t know...

I would not refi your mortgage unless you could jump down from a 30 to a 10 or 15 year term and only if the rate is at least 1% lower than your current rate.

I would do a no fee up to 80% Ltv heloc with a rate at prime or prime less 25 bpts. I would not do a 90 or 95 ltv heloc. This is too much risk on your main home and the rates are usually higher.

Originally posted by @Felicia Bridges :

I'm am looking for a HELOC, so that I can have capital available for down payments/investing. I have never had a HELOC. One company wants to refi the conventional loan on my primary residence in combination with the HELOC, is that how it usually works?

 What is your home value, rate and how much do you owe?

Originally posted by @Felicia Bridges :

@Shaun Weekes $500k/4.49%/$358k

It would be hard to save enough monthly to regain what you paid in fees in 24 months or less which is the standard. Unless you're getting cash out. Now in this case the cash out is in the form of a HELOC so it just makes sense to get a HELOC only.

Just be aware that A HELOC really should be used for short term. So make sure you can pay it off in 6 to 12 months after you use it. Most people pay the IO option and after 2 to 3 years the IO fees ( interest only ) were more than if you just did a regular cash out option from the start.

I prefer a cash out refinance over a HELOC but if you do the HELOC please make sure you have a plan to pay it off quickly or you will regret it.

@Felicia Bridges I've basically gone down the same path and currently have a HELOC as a 2nd mortgage. I use the HELOC to BRRRR properties which allows me to use my liquid capital to invest in deals where I wouldn't get my capital back within 6-8 months to repay the HELOC.

I had the same frustrations as you since a lot of brokers do that bait and switch game since they're hoping they can talk you into a cash out refi on your primary. There are a couple of lenders that are offering good rates on HELOCs right now. Message me and I can send over the details.

@Chris Tran thank you. I would like to be able to do the same thing with my HELOC using the BRRRR strategy.

I will message you.

@Felicia Bridges , try Wells Fargo or US Bank. Note that rates for HELOC are much higher (about 9.3% at Wells Fargo) than when refinancing, but you can withdraw some money from the HELOC (or withdraw the entire amount) at a lower fixed rate for a short term period. Wells Fargo is currently offering fixed advance rate of 3.365% for one year and 5.13% for three years. They also have higher fixed rates for 5-year and 10-year terms. If you are not able to pay the entire balance by the end of the term, then the interest rate on the remaining balance will automatically change to a higher rate, which is normally between 8 and 10%. The biggest advantage of using a HELOC is you don't pay any interest if you don't use it. Basically, HELOC is similar to a credit card, but has a higher credit limit, and most of the traditional banks will not do HELOC less than $10,000 limit.

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