Rental Property Investor · Agana, Guam · Member since 2015 · 71 posts · 11 votes
I was hoping to get feedback on business lines of credit secured by free and clear real estate. For the sake of this discussion, here's an example scenario:
If a person had 5 properties free and clear, valued at $200K a piece, for a total of $1M (free and clear); how much of a line of a business line of credit could they secure against the property, and what would be a favorable and acceptable rate the banks should charge.
Finally, would banks allow the money from the business line of credit to be used as a down payment on future mortgages? Thank you!
the snake is the grass is not so much what the local bank thinks but rather what the Business line credit does to you. I am not going to type their names but some (not all) of the people soliciting for lines of credit are so FOS, One way to call them out is to ask for a amortization schedule, if don't see one in a few minutes, you will never see one because it calls them out. That technique worked for me and saved me a lot of time and trouble.
What the local bank cares about most, is your income/debt obligations, that Line of credit payment can wreck your DTI .. if not handled properly
The longer the down payment money sits in your bank account aging, the more that they don't care where it came from. They will ask for bank statements, if the first oldest bank statement has the money already , then it don't matter.. but if there is a big deposit then absolutely they have to source it. Pretty sure that's an anti-money laundering law.
Instead do this, find a brick and mortar bank that will cross collateralize, the key there is that the collateral (the 5 free and clear lots) be in the same area as the bank and the real state you want to buy.
In any case, what ever you want to use as collateral, you have to get surveys, title work and appraisals and pay for that too
And the price is usually 2 % over the wall street prime plus a point 1.5 points, may be 2 points. and their lawyer drawing up the docs can get pricey