Refinancing and obtaining a HELOC (same or different bank?)

8 Replies

Hi BP-ers - 

I am located in Los Angeles, CA.  I would like to ask for your advice. 

I am looking to refinance a non-owner occupied investment property to obtain a lower interest rate. However, now is a good time to also pull out equity to invest in other multi family out of state. Not all banks offer a HELOC, only a select few like Wells Fargo and some other smaller ones in CA (Union Bank).

What is the best strategy when trying to do both refinance and obtain a HELOC? Refi / obtain HELOC with the same bank simultaneously or can I first refinance with a bank with the lowest interest rate out there that I can find and then as a step two, obtain a heloc with the banks that offer the HELOC? I assume it is easier doing it with the same bank and I also assume it is cheaper, but I could be wrong. I do want a low interest rate first and obtaining a HELOC would be secondary to move on my investments.

Thank you very much.


@Jorge Galvez I have never tried cashing out and pulling a HELOC on a non-owner occupied place. With that being said, I have used that strategy twice on my personal residence here in Riverside, IL. I bought two fixer uppers and then pulled the equity out to buy more investments. I used two different banks both times, although the bank that carries the HELOC was found from my main lender (it is his relationship). Many banks specialize in one or the other, and in this case the bank that held my HELOC was able to give me 90%LTV. This helped me free up more equity to buy with.

If you are holding the property but you want to use the equity to buy, I would probably lean towards locking in long term debt through a cash out refinance. I did this on my Lyon, IL four unit after owning it for 7 month. I was able to get a sub 5% interest rate amortized over 30 years, which worked great. 

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@Jorge Galvez while receiving a HELOC on your primary home is pretty easy when seeking one on an investment property it will be quite challenging. Many banks don't even offer HELOCs on investment properties and many of the ones that do will only lend to 50% or may not want to be in 2nd position with their product. I would certainly try a smaller bank for greater success and don't be surprised if they just give you one Line of Credit with a balance on it. Meaning, they will grant one Line of Credit for 70% of the value, take your current loan, and roll it into the current LOC. So their LOC will be in first position on the loan, and you'll have a payment to the bank. Also, be very cautious with the fine print on these. An investment property LOC will carry a significantly higher rate than a primary residence LOC. 5% might be the lowest you can find...and it will be a variable rate....and it will likely mature into something else after 10 years. Lots of details to be aware of. Try to find 3 banks to compare so you can measure the pros and cons for each. You may have to call 20-50 banks to find what you are looking for though. Good luck!

@John Warren , thank you for your input.  Wow 90%? So far I only found up to 70% in California.    

With a long term debt through cash out refinance, I would be paying interest right away. The reason I am going with a HELOC is because it will take me some time to find out where to invest my money - I am thinking June time frame. I am also planning on using the BRRR strategy once I buy two rehabs and refinance to pay back the HELOC. My plan is to pay the HELOC back so that I can keep my mortgage the same on the my current investment property, which I plan on holding for a long time. Do you see any flaws with this approach versus going with the cash out? Thank you - much appreciated.

@Andrew Postell , thank you very much for your advice on what to look out for! Based on your input, I will make sure to ask how the LOC would be set up with the "newly refinanced" mortgage, even ask them before I start the term/rate refinance with them so that I don't get through the refi only to find out something different.

@Jorge Galvez I love your reasoning for using a line of credit. I also like that about HELOCs. You don't pay to use them until you need them. Just fyi, I think it is harder to get the kind of LTV I am talking about on a non owner occupied property. Mine was owner occupied, hence the great LTV.

Jorge, I’m doing this now in CA. It was not easy as most banks weren’t willing. A small bank, Fremont was. Pm me and I’ll get you my brokers contact info whom facilitated. What is brrr strategy btw?

@Gregg Kaufman , I'll PM you, thanks!  It would be great to connect and gain your insight.

BRRR is a term coined here at Biggerpockets. Maybe you're already doing it. Basically, my plan is to pull equity (HELOC) from my current investment, apply that strategy: Buy another property (maybe two), Rehab it, Rent it, and then Refinance it as soon as I can and as soon as banks can refi so that I can pull my money out to pay back my HELOC on my current investment property. Then I will have my rented property refinanced with its own mortgage(s) and I can repeat the process.

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