1st vs 2nd position HELOC advice
We are trying to decide whether to use 1st or 2nd position HELOC to fund our investment property down payment. Any advice is appreciated.
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.
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. 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.
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
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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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.
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. 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.
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.
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.
Thank you all! Great advice!
Quote from @Steve Vaughan:Current mortgage rate is 2.75%
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.
#1 Personal Finance Contributor
- Rental Property Investor
- East Wenatchee, WA
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#1 Personal Finance Contributor
- Rental Property Investor
- East Wenatchee, WA
Quote from @Glenn P Kakugawa:
Quote from @Steve Vaughan:Current mortgage rate is 2.75%
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.
Ok then hell no. Heloc 2nd only.