Heloc on Heloc on Heloc forever?

Creative Real Estate Financing
8yFollow

Heloc on Heloc on Heloc forever?

Michael M.
Investor · Bronx, NY · Member since 2016 · 78 posts · 40 votes

I just took out a HELOC to use as a down payment an investment property. My monthly payments will be low (interest only for 10 year draw period), so shouldn't really affect my debt to income ratio much.

Once I buy the investment property, can I immediately take out a HELOC on the investment home? Since I am putting down 25% and the house will appraise for more than I bought it for, the numbers should work.

And then can I do it again with the house I buy using that HELOC as downpayment? And keep doing this forever and continue to buy more properties? Or am I missing something?

25Reply
368 views

Most Popular Reply

Mike Dorneman
Rental Property Investor · Drums, PA · Member since 2017 · 345 posts · 365 votes
8y
@Michael M. Simple answer is Yes. You will need to find a bank that will not require you to “season” the property though. Meaning, many banks will take the purchase price instead of the appraisal price within the first year of purchase. They do so to avoid lending to customers that want to do exactly what you are doing 😁. Don’t be discouraged though. I found a small local bank in my community that is very investor friendly. They don’t require me to season the property and they’ll loan based off the purchase price + renovation costs. They’ll loan 80% Bottom line is you can absolutely do this, you will just need to find the right bank. One other thing to note, these loans are commercial, no residential personal. The guidelines for commercial are much more Investor friendly.
27Reply
See this reply in the discussion

109 Replies

Jump to latestLatest
  • David Mirza
    Investor · San Jose, CA · Member since 2015 · 54 posts · 29 votes
    6y
    Originally posted by @Mike Dorneman:
    @Michael M. Simple answer is Yes. You will need to find a bank that will not require you to “season” the property though. Meaning, many banks will take the purchase price instead of the appraisal price within the first year of purchase. They do so to avoid lending to customers that want to do exactly what you are doing 😁.

    Actually they do that to avoid scams where you buy a house, get it to appraise for more than it's worth, get a lone and walk away.  I know it's hard to find a corrupt appraiser now, but this is what some people were doing during the housing bubble.

    0Reply
  • Brandon Carlson
    Real Estate Consultant · Glendora, CA · Member since 2019 · 314 posts · 95 votes
    6y

    @Orlando Perez

    Hey Orlando. Curious to know what banks you work with for HELOC loans on investment properties?

    I reside close to the Diamond Bar area.

    0Reply
  • Orlando Perez
    Real Estate Agent · Diamond Bar, CA · Member since 2016 · 112 posts · 29 votes
    6y

    @Brandon Carlson

    Cal Coast Credit Union and Fremont Bank. Both would take the HELOC on the investment property. Obviously, the rate would be lower if it's the 1(primary) residence. We chose the investment property because it had the most equity and were able to pull more out. Also, there are online companies that probably have just as good rates and even more capital options, since they are online based. We will be finalizing the comparables once we get the final bid for our construction project. We've had SO many road blocks on the way, but we keep truckingI will keep you posted. Let me know if I can help with anything else.

    2Reply
  • Jay P.
    Member since 2018 · 3 posts · 1 vote
    6y

    Hello Guys, I'm new to BP. I am thinking about taking out HELOC on my primary home to pay off my primary mortgage faster (I will be doing mortgage recast at the same time to lower my monthly payment). Please advise me on how I should go about using HELOC wisely (I'm very responsible with money and have a stable income). Below is my scenario.

    Primary Home Market Value = $350,000

    Balance Left on Primary Mortgage = $210,000

    Primary Mortgage Rate = 3. 625%

    HELOC Term That I Will Be Signing Soon = Fixed-Rate HELOC @2.75% (valid only upon initial draw at closing) x 5 years (thinking of drawing about 30K initially)

    My plan is to throw that initial 30K directly to Principal Balance of my primary mortgage then pay of 30K HELOC as fast as I can.

    If you guys have any other ideas, please feel free to share. 

    Thank You! 

    1Reply
  • Kristopher Shobe
    Member since 2019 · 15 posts · 3 votes
    6y

    @ Lareshea Anderson

    That is how I started. I got a Heloc on my primary, used that Heloc to purchase my rental completely. It was a cash deal, total price was 20k and there was already renters living there paying 700/ month. 20k all in. Now I'm applying for ANOTHER Heloc, this time on my rental, which will be for at least 40k, Ill pay off my previous Heloc and use this one to purchase another property.

    1Reply
  • Roshan Bhula
    Investor · Charlotte, NC · Member since 2020 · 9 posts · 5 votes
    6y

    @Mike Dorneman I'm also thinking about a HELOC on my first property. I actually have funds for it but don't want to put down all cash (if I don't have to). I don't want to leverage more of my HELOC than I can actually afford to pay right now, like a credit card.

    Not sure if I’m thinking to conservatively, but want to get your thoughts on that strategy. Thoughts?

    0Reply
  • Matthew Bryan Singh
    Homeowner · AK · Member since 2019 · 6 posts · 3 votes
    6y
    Originally posted by @Jay P.:

    Hello Guys, I'm new to BP. I am thinking about taking out HELOC on my primary home to pay off my primary mortgage faster (I will be doing mortgage recast at the same time to lower my monthly payment). Please advise me on how I should go about using HELOC wisely (I'm very responsible with money and have a stable income). Below is my scenario.

    Primary Home Market Value = $350,000

    Balance Left on Primary Mortgage = $210,000

    Primary Mortgage Rate = 3. 625%

    HELOC Term That I Will Be Signing Soon = Fixed-Rate HELOC @2.75% (valid only upon initial draw at closing) x 5 years (thinking of drawing about 30K initially)

    My plan is to throw that initial 30K directly to Principal Balance of my primary mortgage then pay of 30K HELOC as fast as I can.

    If you guys have any other ideas, please feel free to share. 

    Thank You! 

    Why wouldn’t you just do a Heloc in first lien position? Throw all your income and I mean all of it towards the Heloc? All in one loans function like a checking account for the draw period. If you make good money and don’t have a bunch of credit card debt and a ridiculous new car payment then you will HAMMER that principal down. 

    3Reply
  • Simon C.
    Architect · Austin, TX · Member since 2016 · 8 posts · 2 votes
    6y

    @Michael M.

    If you use the heloc for a down payment on another property, would you need to qualify for another loan entirely, conventional or fha to fund the rest of the purchase?

    0Reply
  • Simon C.
    Architect · Austin, TX · Member since 2016 · 8 posts · 2 votes
    6y

    @Jay P. I think that would make sense only if your HELOC rate is less than your mortgage interest rate

    0Reply
  • Jesse Unrath
    Member since 2020 · 22 posts · 3 votes
    6y

    @Michael M.

    So how did everything work out?

    Im new to REI and wanted to pull out a HELOC on my primary residence. Is the best way to pay my heloc back, to wait till i refi on my rental or put some cash flow towards it every month?? Thanks

    0Reply
  • Joseph AginsPro Member
    Rental Property Investor · Houston, TX · Member since 2015 · 52 posts · 27 votes
    6y

    @Don Konipol what three institutions are these? I can’t find any.

    1Reply
  • Joseph AginsPro Member
    Rental Property Investor · Houston, TX · Member since 2015 · 52 posts · 27 votes
    6y

    @Orlando Perez

    Wells Fargo will do HELOCs on investment properties. However, you can only have a maximum of 5 mortgages in total. I have 8. So, I’m still looking for a bank but maybe WF will work for you.

    0Reply
  • Joseph AginsPro Member
    Rental Property Investor · Houston, TX · Member since 2015 · 52 posts · 27 votes
    6y

    @Kerry Baird

    Good info. I tried PenFed but they will only do it if you have 3 or less mortgages in total. Wells Fargo will also do with 5 or less. Neither of these work for me but I will reach out to the others you have listed

    0Reply
  • Joseph AginsPro Member
    Rental Property Investor · Houston, TX · Member since 2015 · 52 posts · 27 votes
    6y

    @Orlando Perez

    What banks?

    0Reply
  • Bryan Doan
    Member since 2019 · 5 posts · 1 vote
    6y

    Just a newbie question please! If you do a HELOC on your rental (assuming you paid cash for it initially), how do you claim the interests paid for this rental property when you do tax returns?

    Thanks!

    -Bryan

    0Reply
  • Zachary Penn
    Rental Property Investor · Member since 2019 · 29 posts · 12 votes
    6y

    This is fantastic, I just made a post not long ago with the same questions. But I did not get this many responses. If I plan on selling my house in the next year or so anyways, is there a down side to taking out the HELOC now to just get a head start on investing? We want to be serious about this, but its hard to be serious talking to REA/banks when the funds are not truly available now. We are looking at investing out of state (moving out of state as well).

    Once the house is sold, the HELOC will be paid/closed out then anyways, even if we never touched the funds? Is there a down side to applying for this, getting $xx,xxx ready to invest, even if it never happens? Are there fees that come with taking out the HELOC from someone who has really done this? Google has me all over the place some days I think I'm the smartest man in the world others I think I'm the biggest dope and just need to wait to sell the house to get serious. Some places advertise no fees but I am not sure if that is true?

    0Reply
  • Michael M.
    OP
    Investor · Bronx, NY · Member since 2016 · 78 posts · 40 votes
    6y

    Would like to thank everyone for all the interest and advice on this thread.

    @Mike Dorneman I purchased the property with the HELOC as DP, rehabbed, and rented. Next step is refinance. Just to make sure I understand this correctly:

    Next I should refinance the investment property.  

    I should do a cash-out refinance (there should be the equity of the DP plus whatever extra the house is worth due to my rehab).  Here is the part I want to understand - even if there is no appreciation due to market or repairs, can I still do a cash-out to recoup my down payment (I put down 20% of purchase price)?

    With cash-out refi, pay off the HELOC on primary residence. Then I can reuse HELOC funds from primary residence when I find the next deal.

    Is this correct?  Am I missing something?  This sounds too easy...  

    Thanks!!!

    3Reply
  • Frank H
    Las Vegas, NV · Member since 2012 · 24 posts · 3 votes
    6y

    Thanks everyone for all your inputs on this. Does anyone have any insights on terms and conditions for getting approved for heloc? We have about $130k equity in our primary residence but both my wife and I just started a new business and have not been paying ourselves yet. I’m guessing lenders will look at income? If so is there any other way to fulfill that condition?

    Thanks everyone!

    Frank

    0Reply
  • Shalante Davis
    Fort Washington, MD · Member since 2016 · 41 posts · 7 votes
    6y

    @Michael M. This is awesome.

    0Reply
  • Matt W.
    Rental Property Investor · Austin, TX · Member since 2019 · 2 posts · 0 votes
    6y

    A data point on lenders: Wells Fargo offers* HELOC on rental properties. Terms for Texas was up to 60% LTV. Additional underwriting if over 4 (or 5) financed properties (LO was unclear on the threshold and what the additional UW entails). Speaking with a LO over a few different months, I was quoted spreads of prime + 0.875%, +0.625%, and relationship discount spread of +0.5%.

    *HOWEVER, as of 4/30/2020, Wells is getting more risk-averse and stopped accepting new HELOC applications. (Chase has done the same.)

    I have found many lenders have tighter rules for HELOCs in Texas or don't offer them in Texas at all (Penfed), likely due to some particulars of Texas law regulating home lending on homesteads.

    0Reply
  • Kenneth Kussman
    Investor · Irving, TX · Member since 2015 · 101 posts · 23 votes
    6y

    If you use Heloc's to perform repetitive investment purchases, What do you need to show lenders to get the next & the next and the next....... 

    Do you just show new lease agreements?

    Appraisals?

    Your financials?

    This is where I am unclear...

    1Reply
  • Steve P.Pro Member
    Rental Property Investor · San Diego, CA · Member since 2016 · 8 posts · 1 vote
    5y

    @Joseph Agins  

    I am in the same boat as you in terms of the number of outstanding loans. I know that in the midst of the pandemic its even more difficult to find a bank that is accepting HELOC applications even on just your primary. Just following up to see if you were able to find a lender that will do a HELOC with more than 5 loans.

    0Reply
  • Namit Raisurana
    Investor · San Carlos, CA · Member since 2017 · 37 posts · 17 votes
    5y

    Do you know if any of the banks offer more than 500k on heloc on an investment property? I have about a 1m equity in one of my IP at 80% ltv and thus would like to leverage it

    0Reply
  • Michael M.
    OP
    Investor · Bronx, NY · Member since 2016 · 78 posts · 40 votes
    5y

    OP here - I ended up getting a HELOC on the first property and buying the second. Everything worked out great. Now that the house have gone up in value, looking to repeat. Some questions:


    1 - What banks are currently offering HELOC/ cash out Refi on investment properties in New York?

    2 - Paying off HELOC - better to chip away or wait till the term is up and sell the house/ pay off HELOC with profit?

    3 - For next house, HELOC or cash out refi?

    Thanks for all the amazing posts all along the way.

    0Reply
  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    5y

    Try local community bank or Non-qm lender for investment properties.

    I have used PenFed and TD Bank for HELOCs on investment property. Post back if you find another lender who serves you well, and I will add them to my list and pay it forward. These were mostly sourced pre-CV19, so eat the fish and spit out the bones.

    Ridge Lending All in One, first position HELOC

    AFCU does 80% LTV on NOO. Utah

    Americafirst 80% LTV on noo 65% LTV Utah

    Arvest Bank AR, OK, AL, MO

    Bank of West (BNP Paribas) 60% LTV ELOCs

    BB&T will loan on a rental portfolio

    BBVA Compass

    Bellwether NH and MA 85% to 100%, draw 10 yrs

    Boeing employee credit union

    California: Cal Coast Credit Union and Fremont Bank

    Citizens Bank -Minnesota, only in-state. Kyle Potswald

    Citizens first position HELOC

    CMG a financial 70% LTV

    East West Bank, up to 60% LTV with "no docs"

    Figure 80% on a rental, not in LLC

    FirstBank CO a and AZ 75% LTV

    First Florida Credit Union https://firstflorida.cumortgag...

    First Commonwealth

    First Midwest, up to 90% Chicago area

    First Republic - California

    Fulton Bank

    GFA Federal Credit Union 10 yr draw, 10 yr repay, MA

    Granite State CU, NH 90-100%

    Great Lakes Credit Union

    Veritex, Texas HELOC

    Hanscom FCU, Florida

    HSBC 70%, for premier clients only

    Horizon, Kalamazoo Michigan

    Huntington 75% LTV 5 yr IO product available

    Hurst Lending and Insurance Investment property HELOC in Texas. No seasoning.

    Key Bank, FLorida flexible lender, HELOCs on second

    homes and rental properties. 90% LTV on primary.

    Mountain America Credit Union in Utah, 85% LTV, promo rate of 1.99%

    Merchants Bank MN See Pavel Ushakov

    PenFed - max 3 other properties, 89% LTV

    Quorum Federal Credit Union 80% equity, owned by LLC is OK. 5 year interest only payments. New York State. Tiffany Mazzoccoli. 2021

    Regions- yes HELOC but no LOC

    SCCU Florida 70% LTV, 6.25% interest only, not LLC

    Signature Federal Credit Union 75% LTV

    Sound CU "non-owner occupied HELOC, capped at $150K and interest rates are prime + 2%, 3% or 4%, based on credit, not to exceed 70% ltv."

    S&T Pennsylvania

    TCF Bank

    TD Bank 75% line with FICO about 740

    TIAA Direct was EverBank

    Trustco

    Union Bank, specializes in noo HELOC. KCMO, NE

    Union Bank, MUFG.

    Upstate Bank in Rochester NY, LOC up to 80%

    US Bank

    Vectra Bank - Colo

    Workers Credit Union, MA 80-100%

    WSFS...up to 70% on rental

    Zions Bank, Utah

    10Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free