HELOC Against Rental Property

HELOC Against Rental Property

Fort Worth, TX · Member since 2011 · 20 posts · 10 votes

Hello,

This is my first post here and I would like to say thanks in advance for any insight and advice.

Here's my situation:

I have two rental properties that I own free and clear. I've been building up some cash to put down on a third property and my plan has always been to borrow against one of the other properties to get that next property. I only need to borrow $35K but I've shopped around and unfortunately the closing costs on a cash out refi are very high when taken as a percentage of that $35K. Even though interest rates are great, I'd be paying over 8% for financing when closing costs are factored in. That obviously makes this plan much less attractive. The ideal option would be a HELOC (no closing costs) but it seems like banks quit doing HELOCS against investment properties after the financial crisis of 2008. I do have equity in my primary residence but not enough to get $35K.

The way I see it I have four options:

1.) Suck it up and do the cash out refi, and be out the $3K+ in closing costs.
2.) Lie and claim that the rental property is my primary residence.
3.) Wait until I have enough cash to have to borrow for this next property. (That would take me about 9 more months.)
4.) Look harder for a bank or lender who will do a HELOC on an investment property. I haven't tried any small local banks or credit unions, or any large online lenders like Lending Tree, etc. I have great credit, cash in the bank, a healthy income, and two properties free and clear...surely some bank would see that this is a no-lose deal for them.

So what do you guys think? Has anyone had any luck doing a HELOC against a rental property? Any suggestions? Any worthwhile options I'm overlooking? I don't really want to wait the 9 months because I know I can get significant positive cash flow right now, and don't want to miss 9 months of that.

Thanks again for any input.

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Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
14y

Getting an OO when you're not going to live in the property is a complete joke and makes it hard for people who are actually going to live in properties, get them. It's one of the reasons real estate investors get a bad name. I highly suggest against it, unless of course lying is apart of your moral code.

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  • Rental Property Investor · Denver, CO · Member since 2014 · 81 posts · 16 votes
    10y

    I'm also wondering if anyone has insight into national lenders (in addition to Wells Fargo) that do HELOCs on rentals? I'd rather not randomly call around and sit on hold over and over before being told 'no, we don't offer that.' So, any guidance would be great. Thanks!

  • Investor · Wilmington, NC · Member since 2016 · 80 posts · 43 votes
    10y

    I just got off the phone with TD Bank. They definitely do HELOCs for investment properties. A few key data points: 1-day seasoning requirement, up to 75% LTV, up to 43% DTI...

    https://www.tdbank.com/personal/home_equity_line_details.aspx 

  • Investor · Wilmington, NC · Member since 2016 · 80 posts · 43 votes
    10y

    I called Wells Fargo, they also do HELOCs on investment properties. A little more vague on some of the details, but also minimal holding requirement, up to 60% LTV, decent reates, etc.

    https://www.wellsfargo.com/mortgage/loan-programs/home-equity-line-of-credit/

  • Investor · Ashtabula, OH · Member since 2016 · 3 posts · 0 votes
    9y

    With my experience, speaking for my area here in Northeast Ohio, almost all local credit unions offer HELOC with very attractive terms. I have taken out 2 within the past 6 months on properties I own free and clear!

  • Investor · Parma, OH · Member since 2016 · 101 posts · 46 votes
    9y

    Huntington Bank will do a HELOC up to 75% LTV but only if the property is in your personal name. They will not do the loan into an entity and will not do it if the deed of the property is in an entity. Overall, Huntington is a great bank to work with and wont give you a bunch of junk fees.

  • Investor · Gaithersburg, MD · Member since 2016 · 4 posts · 0 votes
    9y

    I stopped by local TD Bank branch last week to ask them about this. They do HELOC on rental property up to 70%. Closing cost is minimal, $99 for origination fee and $50 annual fee.

  • Investor · Charlotte, NC · Member since 2015 · 183 posts · 146 votes
    9y
    Ben D. My suggestion is nix option #2 and not lie and don't post on a public forum that lying is an option you'd consider. Focus on the other choices. You'll get what you need with a little effort.
  • Investor · Massillon, OH · Member since 2017 · 3 posts · 0 votes
    9y

    Huntington Bank will do line of credits on rental properties in their footprint up to 75% LTV. $60 annual fee. 1% bump on interest rate

  • Rental Property Investor · Jacksonville, Florida Area · Member since 2016 · 106 posts · 48 votes
    9y

    Does Navy Federal Credit Union offer a HELOC on an investment property?

  • Orlando, FL · Member since 2017 · 241 posts · 254 votes
    9y

    @Sam Ragan - I'd be interested in those answers as well. 

    I can say I have had extensive conversations with NavyFed encompassing may hours on the phone and in-branch and, while it is possible that they "might" do it, I would avoid them. I don't say that lightly as I love them for all sorts of other products, but the mortgage/home-loan people only seem to really understand straight and narrow consumer loans. The only non-owner occupied loan they seem to understand is their basic investor loan which is essentially a normal mortgage with a slightly higher rate and the same 60-90 turnaround time.

  • Orlando, FL · Member since 2017 · 241 posts · 254 votes
    9y

    @Bernadette Sullivan have you used Huntington for this and do you have a contact? I spoke with them last week and got a resounding "No, we don't do that".

  • Investor · Massillon, OH · Member since 2017 · 3 posts · 0 votes
    9y

    @ Chuck Cramer ... I am a personal banker there.  I know we do, but you have to live in our footprint.

  • San Antonio, TX · Member since 2017 · 179 posts · 71 votes
    9y

    @Sam Ragan Did you ever find out if Navy Federal is doing HELOCs on rental properties? I've gotten conflicting answers thus far. Thanks

  • Rental Property Investor · Jacksonville, FL · Member since 2008 · 784 posts · 528 votes
    8y

    I called TD Bank this week, this is what I got out of them: Yes, they do offer HELOCs to investors on Investor properties. You must have a 685 credit score or higher, 75%LTV max, orig fee $99, Annual fee $50. Then it gets weird. If the amount of the HELOC is less than 200k, they will only do a "desktop appraisal", they look at the "taxable value" and give you 75% of that amount. If the loan is over 200k, they will pay for the traditional appraisal.

    Huntington is only doing HELOCs in Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, West Virginia, and Wisconsin. 

  • Investor · Phoenix, AZ · Member since 2013 · 167 posts · 127 votes
    8y

    Midfirst Bank will do HELOCS on rental properties.

  • Real Estate Agent · Pasadena, CA · Member since 2015 · 476 posts · 263 votes
    8y

    Your initial comment suggested that the out of pocket expense would be too great... 

    but after reading some of your own replies: its seems that the costs is only $3k ..... hmmmmm 

    do the refi- cash out: and pay the 3k (and figure out how to make 3k else where to off set it... ) : seems to be the easiest way... 

    ask your lender to give you $1,000 for doing it for you.

    and then ask for another $1500 from your realtor - that will help you get the next home: or if the next home is $50k (as an example) : offer $53k with 3k coming back to you for non-recurring and recurrent closing costs.... and there you have it: you did not lose any money.... 

    3k is nothing... if you can get a new home that will cash flow: think about dollars not pennies.... 

    Do uber or lyft for a 2 months and get the 3k.... 

    whole sale one property for 5k : then you will have a 2k surplus... 

    where there is a will - there is a way... take action and make it happen. 

    (lastly : I'll let you barrow 3k for 50% of the equity in your next home :)  ) JK but not really 

    Good luck 

  • Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
    8y

    I personally use Huntington and they're good to work with here in Chicagoland. 

  • Investor · Portland, OR · Member since 2014 · 21 posts · 10 votes
    8y

    I've used PenFed credit union to get a HELOC with 80% LTV at interest rate of Prime + 1% on a non-owner occupied property. Process was straight forward and easy.

  • Developer · Bowie, MD · Member since 2017 · 110 posts · 22 votes
    8y

    Hi John Tarantino or anyone,

    What kind of documentation was required for the HELOC? Did they ask for tax returns? and can it be used for investment property?

    Thanks in advance.

    Tracuy

  • Rental Property Investor · Charleston, SC · Member since 2013 · 14 posts · 1 vote
    8y

    At a minimum, they're going to require past 2 years tax returns, recent pay stubs, statement of current financial situation, and hard credit pull. And they'll do an appraisal on the property, usually a full one but maybe a desk appraisal if LTV is low enough. You can use a HELOC to finance an investment property and though I'm not an accountant, I have a been told by a few that you can deduct HELOC interest when it is used to finance an investment property (purchase, repair, improvement).

  • Investor · Milwaukee, WI · Member since 2016 · 1 post · 0 votes
    8y

    I'm looking into using a HELOC for investment property, which is how I and most probably stumbled here years later. Interesting thing in the research, I found the below on LendingTree's website. DEFINITELY reason to consider what one posts online!!!

    "A few years ago, a landlord was having trouble finding a home equity line of credit on investment property. He asked in an open chatroom whether he should lie on his application and say that the rental home was his primary residence. Another poster replied that he then owned eight investment properties, had done so for many years, and had falsely claimed on each application that he was going to live in them. He said, “It’s not a bad thing, besides, you get better terms anyway…”

    You may question how smart that man was. His seemingly genuine profile, next to his post, included his forename, surname, home city, and photo. Also, he had just admitted to multiple counts of felony fraud.

    Lying on a mortgage application (including those for home equity products, which are second mortgages) is generally a federal offense and is usually investigated by the FBI, sometimes assisted by state law enforcement. It comes with maximum penalties of 30 years in federal prison or $1 million in fines or both. True, it is unlikely you would suffer those for a single fraudulent HELOC application, but do you really want to be looking over your shoulder for years to come?"

  • Rental Property Investor · Philadelphia, PA · Member since 2017 · 30 posts · 2 votes
    7y

    I have had a HELOC on my investment property with PendFed Credit Union for about few months now. The process was smooth, fast and great rate except the appraisal came low. Could be that I applied after couple of months of purchase. They had no seasoning period and gave 80% LTV.

    I have talked to TD Bank last week, the HELOC rate was 6.99%, 75% LTV and around 2k closing costs and other fees. They do Helocs for two investment properties and no seasoning period as well. Not sure if I want to go as the closing costs and fees are high.

    @Jack Bobeck, I know its been a year you reached to TD Bank for HELOC. Can you share your loan officer details so that I can talk to them and get a better rate probably.

  • Rental Property Investor · Jacksonville, FL · Member since 2008 · 784 posts · 528 votes
    7y

    @Madhu Kumar I was inquiring about a HELOC for a property held inside an IRA, they would not do that for me. So I dropped it.

  • Member since 2019 · 84 posts · 32 votes
    7y

    I hear that the banks will ask you to show 6 month reserves for your other investment properties before they give you a HELOC.

    IS IT TRUE?

    For me it means assembling 40k cash, not an easy task

  • Jim WatsonPro Member
    Rental Property Investor · Davis, CA · Member since 2016 · 56 posts · 17 votes
    7y

    Just talked to the Wells Fargo branch in Davis CA. They do Heloc's on rentals. The key is finding the right person to talk to. 

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