Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
6y
Cash is king. I'd rather have cash than less debt.
Most HELOCs have a low interest rates. To me paying a low interest rate on a HELOC is like buying insurance. I have protection against bigger risks for a nominal price.
Good new. I heard back from my Credit Union and they froze the account because they received a "payoff request" from another lender, who I closed on 2/25 a new mortgage. This was my exit on my first rental property where I did a BRRR. I used the HELOC, which is on my primary home, to buy the rental with all cash last year, and refinanced into a 30 year mortgage in February of this year.
Sharing specific language from the Credit Union in case this happens to anyone else: "When a HELOC payoff request is received we freeze the line for draws. Please reach out to [ ] and ask them to submit documentation stating that it's ok for us to unfreeze the HELOC for draws to be made or that you are no longer seeking to payoff the HELOC."
I immediately called the lender for the mortgage, and they said they will send documentation over today. They thought it was strange the HELOC was frozen. So, my lessons learned from this, is yes, a bank can freeze a HELOC for whatever reason. What if I was using this to pay employees or cover bills? Especially now? I got no notice about this, I just saw it when I was doing my monthly managing of books.
Since this happened on a weekend when I couldn't really reach anyone it made me go through a range of emotions including anger and fear. But then I got defiant. I'm a newbie investor, it took a LOT to learn, build up the courage and take the steps to get my first ever HELOC on my primary home. If for some reason this doesn't get unfrozen, I'm back to square one on finding financing. It made me realize that I really need multiple financing strategies. I also know things like this are going to happen and no way can I let one lender stop me on my real estate journey. I'm changing my financing plan because of this. So as always, when unexpected bad things happen, I just learned a lesson!