1st vs 2nd position HELOC advice

Member since 2022 · 11 posts · 2 votes

We are trying to decide whether to use 1st or 2nd position HELOC to fund our investment property down payment. Any advice is appreciated.

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Nate Sanow

Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes

Do you own something free and clear? That is the only way I can think of a HELOC being a first position. Otherwise, by default, a HELOC would always be 2nd position, to my knowledge.

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Nate Sanow
Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
3y
Do you own something free and clear? That is the only way I can think of a HELOC being a first position. Otherwise, by default, a HELOC would always be 2nd position, to my knowledge.
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Glenn P Kakugawa
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Member since 2022 · 11 posts · 2 votes
3y
Quote from @Nate Sanow:

Do you own something free and clear? That is the only way I can think of a HELOC being a first position. Otherwise, by default, a HELOC would always be 2nd position, to my knowledge.
No, we still owe on our first mortgage, however the lender is asking if we would like a 1st or 2nd position heloc. I know there are advantages to both depending on the situation (ie. using the heloc to pay off the mortgage), however that is not what we are doing at this point in time. Just wondering if there are other advantages to putting the heloc in first position.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Glenn P Kakugawa
You can’t put the heloc in first position if you already have a mortgage. Your lender would never let you subordinate the loan. You would need to get your first position lender to sign documents stating this.
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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
3y
Quote from @Glenn P Kakugawa:

Quote from @Nate Sanow:

No, we still owe on our first mortgage, however the lender is asking if we would like a 1st or 2nd position heloc.

Definitely keep a low fixed first if you have it. What's the rate of your current mortgage?

Helocs are variable and have fine print that allows them to freeze or call. Fixed first is safer for you. Do not pay off your first with a heloc.
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Nate Sanow
Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes
3y
Quote from @Glenn P Kakugawa:

Quote from @Nate Sanow:

Do you own something free and clear? That is the only way I can think of a HELOC being a first position. Otherwise, by default, a HELOC would always be 2nd position, to my knowledge.
No, we still owe on our first mortgage, however the lender is asking if we would like a 1st or 2nd position heloc. I know there are advantages to both depending on the situation (ie. using the heloc to pay off the mortgage), however that is not what we are doing at this point in time. Just wondering if there are other advantages to putting the heloc in first position.

The only way I see that being possible is if your HELOC pays off the first position loan, and instead of having that loan, you have a new loan, being the HELOC. If the existing loan does exist, it is in first position, and won't give up first position unless paid off or refinanced.
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Glenn P Kakugawa
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Member since 2022 · 11 posts · 2 votes
3y
Thank you all! Great advice!
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Glenn P Kakugawa
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Member since 2022 · 11 posts · 2 votes
3y
Quote from @Steve Vaughan:

Quote from @Glenn P Kakugawa:

Quote from @Nate Sanow:

No, we still owe on our first mortgage, however the lender is asking if we would like a 1st or 2nd position heloc.

Definitely keep a low fixed first if you have it. What's the rate of your current mortgage?

Helocs are variable and have fine print that allows them to freeze or call. Fixed first is safer for you. Do not pay off your first with a heloc.
Current mortgage rate is 2.75%
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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
3y
Quote from @Glenn P Kakugawa:

Quote from @Steve Vaughan:

Quote from @Glenn P Kakugawa:

Quote from @Nate Sanow:

No, we still owe on our first mortgage, however the lender is asking if we would like a 1st or 2nd position heloc.

Definitely keep a low fixed first if you have it. What's the rate of your current mortgage?

Helocs are variable and have fine print that allows them to freeze or call. Fixed first is safer for you. Do not pay off your first with a heloc.
Current mortgage rate is 2.75%

Ok then hell no. Heloc 2nd only.
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