HELOC loans on Investment Property?

8 Replies

The HELOC (home equity line of credit) is for your primary residence and uses the residence as collateral. It has a lower variable interest rate. In my area, the LOC on an investment property is a commercial line of credit and is called a Business Line of Credit. The property is used as collateral and the interest rate is variable and higher. There is also a personal line of credit that has no collateral and has the highest interest rate. Avoid this one.

I use the business line of credit frequently. For mine, I have to have an initial appraisal done, then the bank will lend up to 80% of the equity I have in the property. The LOC sits unused without any interest, waiting to be spent instantly when I have a deal. There is an annual couple hundred dollar fee to keep it active. I think this is a great product.

The alternative is to take out a mortgage on your duplex. I like this less because you get the money and have to put it in a bank account while paying interest on the money, waiting for your next deal.

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Echoing what @Benjamin Aaker was saying, you have various options. One of the things to also consider is whether or not your interest is going to be higher with a mortgage or a HELOC. Regarding the mortgage piece, remember that, when owning outright, you can take as little or as much as you wanting; however it's not a rotating line of credit so if you want to do it again, you'd have to apply again. Depending on how quick you need the cash and can pay it back, it may be more advantageous to take the one with the lesser interest payment.

@Mike Crissy first, You should look at what you plan to use it for. If you are going to use it for a down payment or purchase that you plan to flip or refi and then pay off the line to reuse, great approach if you are going to use it as a long term note, not so much of a good idea. You definitely can get a HELOC on an investment property if the deed is on your name. If it's in an LLC then you need to get a businesss line of credit secured by the property. I know it sounds the same but the requirements are very different. A BLOC is a lot tougher to get. As others said, start with PenFed. 80% LTV on any property up to 4 units. They do have restrictions. You can only own a total of 4 properties even if they are free and clear. Sounds like you should be ok with this if you just own the one. Get the line for ad much as possible. You only pay interest on what you draw, not the value of the line.

Two other lenders are TD Bank and Harris Bank.

@Mike Crissy If you look at Quorum FCU they offer a HELOC on investment properties 1-4 unit, a minimum Fico of 680, the property can be in a LLC and you can go up to 80%. This is a 15 year loan with a draw period of 5 years and repayment period of 10 years. Quorum also follows Fannie/Freddie guidelines and will finance up to 10 properties whereas PenFed will only go up to 4.

Best of Luck!