Cant find HELOC Lender for an Investment property in CA

[Patrick O'Fallon]

I posted this in another forum but I think this may be a good place to post as well.  

Hello everybody! Happy Friday.

I currently have an investment property that appraises at $900k. My primary mortgage is at $550k and dropping. I have a $50k HELOC with a balance of $47k. I want to pull a $100k line of credit, pay off the current HELOC balance and only have my new HELOC and the primary mortgage. This puts me at a 66% LTV. The problem I'm running into is that lenders require a 60% LTV on investment properties which seems insane to me, or they just don't lend on investment properties. Any ideas on how I can pull this equity out? Any recommendations on lenders? I'm stuck here.

Thanks,

-Patrick

[Sasha Mohammed]

you have to look at it from a lender's perspective. IF you get into a tough position and foreclose on a property, chances are, you're more likely to foreclose on the investment property than the roof over your head. With that said, yes, it's more difficult to get higher LTV's on inv. properties. That doesn't mean it's impossible. just a bit more difficult for traditional lenders.

Since the properties are in California, I would suggest finding a lender that calculates off of Debt Service Coverage Ratio as opposed to DTI. This means they're basing lending decisions off of the rents received as opposed to your ability to repay with personal income.

As an example, I have a lender that will allow you to cash-out up to 90% (ideally not exceeding 80%) so long as the rents received exceed the PITIA of the property by $1. The rates are a bit higher than traditional, but I would ballpark in the 6's which is a drop in the bucket compared to private money/ hard money lenders. 

Point being, in California, it's a little easier to qualify for DSCR-type loans than other states because gross rents in California are insane these days. You may have better luck going this route than trying to fit a square peg into a round hole with banks or credit unions.