If I have Heloc can I cashout refinance?

8 Replies

Input requested. Thank you

I have 150K equity in current home and just closed on Heloc and have zero balance on 75K HELOC credit line.

Will I still be able to do a cash out refinance to have more accessible funds for real estate investing?

My intention is to have available monies for cash offers on properties up to 70K.

Thanks for any input

So this will be a slightly lengthy answer so bear with me.

Based on your current situation with your Mortgage and your HELOC the max Combined loan to Value(CLTV) for a Principal Residence cash-out refi is 80% in a 1 unit and 75% in a 2-4 unit, In a investment property cash-out refi the CLTV on a 1 unit is 75% and 2-4 unit is 70% .
As I don't know the value of your home I'm going to use 400k  and a Principal Residence 1 unit for this scenario. At 400k the max CLTV for the Cash-out refi would be 320k or 80%, If your loan is 400k and 150k equity that would put your current loan at 250k. If the current first mortgage is at 250k and we add the 75k HELOC that would put you at 325k so you would not be able to draw any more out with a cash out-refi as you would be above the 80% threshold. Once again this is only a scenario to help try to help as I do not have your actual numbers to give you a better idea. 

The way you should have proceeded was to first do a Cash-out Refi on the property and draw to the max allowed by your scenario then get a HELOC, as a HELOC with allow you to go as high as 100% CLTV with most stopping at 90% CLTV

Best of Luck!

Well if it's all about getting the max cash out I'd suggest tossing the HELOC and getting a cash-out refi at 80% Loan-to-value which would be 380k then getting the HELOC set-up again as then you can get to 95% combined-loan-to-Value with certain lenders.

If you try to do a cash-out refi on your first right now you will be hit with higher pricing since you have the HELOC which raises your CLTV and you will be able to get less out because of the CLTV limits on the first.

Best of Luck!

Originally posted by @Torrell Palmason :

Well if it's all about getting the max cash out I'd suggest tossing the HELOC and getting a cash-out refi at 80% Loan-to-value which would be 380k then getting the HELOC set-up again as then you can get to 95% combined-loan-to-Value with certain lenders.

If you try to do a cash-out refi on your first right now you will be hit with higher pricing since you have the HELOC which raises your CLTV and you will be able to get less out because of the CLTV limits on the first.

Best of Luck!

Torrell, excellent information.

We paid off our 2 family primary a couple weeks ago in order to just get a large Heloc. 

We requested $300k, but adjusted down to $250k to avoid the need for a full appraisal. 

Is that standard to your knowledge?  Desktop appraisal ok at or below $250k but full appraisal required if greater?  A full appraisal would take a month and cost $700-$900 so I didn't want to bother. Thank you! 

 

I would like to learn more about it.

Originally posted by @Steve Vaughan :
Originally posted by @Torrell Palmason:

Well if it's all about getting the max cash out I'd suggest tossing the HELOC and getting a cash-out refi at 80% Loan-to-value which would be 380k then getting the HELOC set-up again as then you can get to 95% combined-loan-to-Value with certain lenders.

If you try to do a cash-out refi on your first right now you will be hit with higher pricing since you have the HELOC which raises your CLTV and you will be able to get less out because of the CLTV limits on the first.

Best of Luck!

Torrell, excellent information.

We paid off our 2 family primary a couple weeks ago in order to just get a large Heloc. 

We requested $300k, but adjusted down to $250k to avoid the need for a full appraisal. 

Is that standard to your knowledge?  Desktop appraisal ok at or below $250k but full appraisal required if greater?  A full appraisal would take a month and cost $700-$900 so I didn't want to bother. Thank you! 

 

 

@Jake Song @Ernie Gutierrez For the best of both worlds between lowering interest cost and accessing equity, I'm a big fan of a specialized 1st position Heloc, called an "Offset" Mortgage in other countries. It's a line of credit, typically set to 80% LTV. It's tied to a zero balance sweep checking account, so every deposit is swept towards the remaining balance of your home. With cashflow, it creates a large snowball effect where your remaining balance and monthly interest cost are both dropping rapidly. So you get the benefit of a cash-out (Access to equity) without increasing your payment on day 1.
My wife and I have one on our property, and it's been a great tool. We're able to use idle funds to lower our balance and save interest cost. When the market turns and we find a good buy, we'll simply stroke a check from our credit line and purchase in cash. The best part, each additional property purchased through the line pays off faster than the last with the additional cashflow.

@Ernie Gutierrez , looks to me like you're already set up to do what @Justin Phillips talked about - using your existing HELOC to buy the next $70k (bargain / cash flowing) property that you desire. [Btw, I don't recommend anyone borrowing more than 75% against their primary, even if some Lenders will loan 90-100% of their appraisal].

If you buy good enough bargains, you can go on to use your equity in each subsequent investment property to do "BRRRR", with the emphasis on Repeat.  Good luck...