Getting crushed by HELOC interest

Greenwich, CT · Member since 2017 · 81 posts · 8 votes

Quick background: We purchased a multi family that was to be a live in flip and to fund the purchase and the reno we leveraged our primary residence at the time. We moved into the live in flip and once the flip was over we refi’d hoping to recoup everything. We didnt do a cashout refi because the rate on the mortgage wouldve been too high, so we took out another HELOC. Since we did not recoup the costs to pay back the first HELOC, we now have two maxed out HELOCS. Long story short, the reno cost way more that anticipated. Whats done is done and we learned a lot during the process but now we’re gettting hammered with those HELOCS because the interest rates are skyrocketing. One is at 7.5% and the other at 9.3%. I’m considering taking out a 401k loan to knock down the amount of one of the helocs (9.3% because its highest and also interest only). This way, the interest payments will go to us, we can pay back the heloc faster, and 9.3% is not a gain im seeing in the market anytime soon. I know theres no way to time the market but things are looking bleak in the future so i feel any unrealized gains we would be missing wouldnt be so bad. The real problem is paying a pre tax value back with post tax dollars. Anyone have any suggestions?

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V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

A loan to payoff another loan. You need to get out of the property. Hopefully, people read this and stop playing the super leveraged game.

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Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Blake B.:

Quote from @Dan H.:

I do not understand. This was a live-in flip, flip is complete. Time to sell and realize the profits (if there are any other than the learning).
Borrow from 401k seems very high risk at this point.

Fed recently announced next increase may be more than had been anti pared prior to the comment. This is strong indication rates are going to go up more.

Sell, pay back debt resulting from this flip. Learn and be more successful next time. Also remember the only people who never fail are those that do not push their limits. Nothing wrong with failing if you learn from it.
Good luck
With the recent bank failures, it's likely the FED will not raise rates as much as initially anticipated...but that just means inflation will rise again.

The bank failure is direct consequence of Fed action to bankrupt financial institutions LOL
it is similar to why they force everyone to get vaccinated LOL and some people got heart attack LoL

they would say it is for greater good LOl
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Jim K.:

Quote from @V.G Jason:

Wow, the narrative is really changing on here. Just a little while ago, it'd be someone recommending to take on some other form of debt to manage new debt. And 3-5 others piggybacking that.

Perhaps sanity is finally winning out in these forums.

Just 16 months ago J.P. Morgan want to enter crypto business , reading that scary news makes me realized I am one of the only sanity reader in the forum lol

if bank like JPm gone wild I could imagine about regular Joe
0 Reply
Tyler Williams
Dentist · Taylorsville, UT · Member since 2013 · 102 posts · 68 votes
3y
@Nick Causa some Credit Unions offer a fixed HELOC for 3-5 years at a lower rate.
2 Reply
Tyler Williams
Dentist · Taylorsville, UT · Member since 2013 · 102 posts · 68 votes
3y
@Nick Causa rates are far more insignificant compared to cash flow and equity. If the seal makes sense at a higher rate, don’t swear the rate. Just make sure the numbers work and include vacancy, taxes, management, capx repairs, etc.
2 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3y
I'm not following the trail...do you have two properties...your former and current primary residences and both have 1st and 2nd mortgages? If so, sell one (tax free) and pay down debt on both. Property values have skyrocketed and should make up for budget overages. Maybe part of the storyline is missing here...or you are upside down on valuation.
0 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Tyler Williams:

@Nick Causa some Credit Unions offer a fixed HELOC for 3-5 years at a lower rate.

Bethpage credit union, I use them for fixed rate Heloc
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
Quote from @Blake B.:

Quote from @Dan H.:

I do not understand. This was a live-in flip, flip is complete. Time to sell and realize the profits (if there are any other than the learning).
Borrow from 401k seems very high risk at this point.

Fed recently announced next increase may be more than had been anti pared prior to the comment. This is strong indication rates are going to go up more.

Sell, pay back debt resulting from this flip. Learn and be more successful next time. Also remember the only people who never fail are those that do not push their limits. Nothing wrong with failing if you learn from it.
Good luck
With the recent bank failures, it's likely the FED will not raise rates as much as initially anticipated...but that just means inflation will rise again.
Did you watch Powell? We're getting the anticipated hikes. Only way we won't is if this CPI posts way favorably. The SVB fallout is just a consequence of the rate hikes, this was supposed to happen. This won't deter Powell, if anything encourage. Fed funds is going to 6 unless we get some serious cooling. He's going to deliberately over do it.
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
Quote from @Carlos Ptriawan:

Quote from @Jim K.:

Quote from @V.G Jason:

Wow, the narrative is really changing on here. Just a little while ago, it'd be someone recommending to take on some other form of debt to manage new debt. And 3-5 others piggybacking that.

Perhaps sanity is finally winning out in these forums.

Just 16 months ago J.P. Morgan want to enter crypto business , reading that scary news makes me realized I am one of the only sanity reader in the forum lol

if bank like JPm gone wild I could imagine about regular Joe

They're all going to get into crypto once we get out of this anti risk environment. They all are-- Goldman, JP, Morgan, Boa, Wells. Everyone one of them. Most already have a team earmarked for it, just waiting for regulations and the FED to green light. Only big institution that's already engaging is Fidelity, they won't be the only one. Citadel and Blackrock already have physical team in place.

Knowing the shady fed and sec. They'll enter the space as rates start de-escalating. oh so conveniently.
0 Reply
Blake B.
Real Estate Agent · Chicago, IL · Member since 2017 · 75 posts · 37 votes
3y
Quote from @Carlos Ptriawan:

Quote from @Blake B.:

Quote from @Dan H.:

I do not understand. This was a live-in flip, flip is complete. Time to sell and realize the profits (if there are any other than the learning).
Borrow from 401k seems very high risk at this point.

Fed recently announced next increase may be more than had been anti pared prior to the comment. This is strong indication rates are going to go up more.

Sell, pay back debt resulting from this flip. Learn and be more successful next time. Also remember the only people who never fail are those that do not push their limits. Nothing wrong with failing if you learn from it.
Good luck
With the recent bank failures, it's likely the FED will not raise rates as much as initially anticipated...but that just means inflation will rise again.

The bank failure is direct consequence of Fed action to bankrupt financial institutions LOL
it is similar to why they force everyone to get vaccinated LOL and some people got heart attack LoL

they would say it is for greater good LOl

You are an astute man. The banking system was designed to fail over and over when Woodrow Wilson signed the Federal Reserve Act and FDR signed the Emergency Banking Act 20 years later.
0 Reply
Blake B.
Real Estate Agent · Chicago, IL · Member since 2017 · 75 posts · 37 votes
3y
Quote from @V.G Jason:

Quote from @Blake B.:

Quote from @Dan H.:

I do not understand. This was a live-in flip, flip is complete. Time to sell and realize the profits (if there are any other than the learning).
Borrow from 401k seems very high risk at this point.

Fed recently announced next increase may be more than had been anti pared prior to the comment. This is strong indication rates are going to go up more.

Sell, pay back debt resulting from this flip. Learn and be more successful next time. Also remember the only people who never fail are those that do not push their limits. Nothing wrong with failing if you learn from it.
Good luck
With the recent bank failures, it's likely the FED will not raise rates as much as initially anticipated...but that just means inflation will rise again.
Did you watch Powell? We're getting the anticipated hikes. Only way we won't is if this CPI posts way favorably. The SVB fallout is just a consequence of the rate hikes, this was supposed to happen. This won't deter Powell, if anything encourage. Fed funds is going to 6 unless we get some serious cooling. He's going to deliberately over do it.

It's a damned if you do, damned if you don't. At some point, the system needed to change...the only shame is that the solution was already orchestrated by the folks at the helm now and it's going to be more garbage in garbage out (digital dollar).
0 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Blake B.:

Quote from @V.G Jason:

Quote from @Blake B.:

Quote from @Dan H.:

I do not understand. This was a live-in flip, flip is complete. Time to sell and realize the profits (if there are any other than the learning).
Borrow from 401k seems very high risk at this point.

Fed recently announced next increase may be more than had been anti pared prior to the comment. This is strong indication rates are going to go up more.

Sell, pay back debt resulting from this flip. Learn and be more successful next time. Also remember the only people who never fail are those that do not push their limits. Nothing wrong with failing if you learn from it.
Good luck
With the recent bank failures, it's likely the FED will not raise rates as much as initially anticipated...but that just means inflation will rise again.
Did you watch Powell? We're getting the anticipated hikes. Only way we won't is if this CPI posts way favorably. The SVB fallout is just a consequence of the rate hikes, this was supposed to happen. This won't deter Powell, if anything encourage. Fed funds is going to 6 unless we get some serious cooling. He's going to deliberately over do it.

It's a damned if you do, damned if you don't. At some point, the system needed to change...the only shame is that the solution was already orchestrated by the folks at the helm now and it's going to be more garbage in garbage out (digital dollar).

nobody sure what change needs to be change, even if they print more trillon of dollar or burning trillion of dollar, it wouldn't matter, just take a look after Fed burning so much money from REPO, the inflation is still on the six , real estate is still going up, and the bank is still collapsing due to bank run. They dont achieve anything, even employment is still strong.

What 'system needed to change' is nobody knows, it's a dystopian world out there. One thing that's still making sense is still keeping investing in direct real estate purchase, as it's tangible hard asset LOL that's not easily manipulated.
1 Reply
Account Closed
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
3y
This is the other side of the risk equation that all the "refi till you die" bros miss completely. The tide is out. Who is naked? Debt always equals risk. Extend yourself more at your own peril. Better to close out the transaction, take your lumps and move on and dont be so cavalier with borrowed money again.
6 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Account Closed:

This is the other side of the risk equation that all the "refi till you die" bros miss completely. The tide is out. Who is naked? Debt always equals risk. Extend yourself more at your own peril. Better to close out the transaction, take your lumps and move on and dont be so cavalier with borrowed money again.

In essense, this poster is doing exactly like what Silicon Valley bank did, he borrow the money from another loan while SVB is buying MBS notes in 2020 when yield is very low, but both poster and SVB are not wrong, because at that particular time and place, that's supposedly the right "thing" to do. We can't anticipate all possibilities in the future. Getting HELOC in 2020 is not criminal activity.

Now when the tide changes course because the God of money has changed their opinion about themselves and realized the unexpected, they don't understand what to do.

I guess the bailout plan for the poster is pretty clear, either refi or sell. I would prefer refi personally and ride the wave until the economy has been stabilized.

You may want to hold the property because real estate price started going up again ...
1 Reply
Nick Causa
OP
Greenwich, CT · Member since 2017 · 81 posts · 8 votes
3y
Wow this thread went off, but this is why i love this platform so much. Where else can you get advice on something like this while also feel like an idiot? At the same time, many people weighing in mentioning "don't play the super leveraged game" contradict countless articles on here that talk about doing your math, leveraging the value of your primary residence through a HELOC (OPM) to purchase another home and tout a "just get in the game somehow" mentality. In the end of that story we got screwed by a contractor and got bait and switched. We did the math at the time, it all made sense and in the end we got change ordered to death. We took a swing. THAT and when we finished everything we had unexpected urgent medical expenses that we needed to use some of the HELOC for. It sucked but I digress.

Im going to be an open book and give you my numbers that will tell more of the story which to be honest I don't think is as bad as it seems. Let me start all of this buy saying we started this journey by purchasing a $295K SFR by putting down 5% ($14,750). This is the only money we've come out of pocket for on this journey other than all of this interest right now.

HOUSE 1 (SFR): Original Primary residence. We bought at a great price of $295k and after two years noticed its value was actually 440k. When we saw this, we got the house appraised and we took a 90k HELOC out to buy and reno a BRRRR closer to work: Current Value if sold: 500k(+/-) / current loan: $235k @ 3.75% / HELOC $90k @ 7.5% - This is an airbnb that pays for itself and the HELOC costs.

HOUSE 2 (MF): I shouldn't say this was a live in "flip" it was more of a live in BRRRR that we want to move out of at one point and realize the cash flow: Purchase price $625,000 (we put down 3.5% to use the rest of the $ on renos which we wanted to recoup after refi), Current Value if sold: 1,000,000(+/-) / current loan: $575k @ 3.5% / HELOC $118k @ 9.3% (Interest only). We house hack this residence and do not pay much to live here even including the HELOC payments.

So with all of this debt we do have a good amount of equity which all started from a $14,750 purchase. Here are my options (and I'm sure people have others):
1) Sell something.
2) do a lower interest 15 year equity loan at 7% (that won't be interest only) on the home with the higher HELOC interest (which is interest only), pay off that HELOC, and then gradually pay down the loan.
3) I could refi the full loan to a 7 Year ARM at 5.75% which is what I was quoted at.
4) 1031 exchange everything and buy something else
Thanks all
2 Reply
Robert Cornell
Homeowner · Inland Empire, CA · Member since 2015 · 14 posts · 5 votes
3y
@Nick Causa
Thank you for your post and sharing your experience… Some of us can truly relate…
Currently I'm in a similar situation. We took out a HELOC 80k to purchase our SF in 2020. Balance is now at 40k.
Something that has helped us is sending extra payments from Tax Refunds, Job Bonuses, Percentage of rental profits, etc…
I’ve debated on selling my extra vehicle aswell to lower the principal…
I’ve been searching for other possible solutions.
Nothing so far…
Thanks again for sharing and good luck!
0 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3y
Quote from @Nick Causa:

Wow this thread went off, but this is why i love this platform so much. Where else can you get advice on something like this while also feel like an idiot? At the same time, many people weighing in mentioning "don't play the super leveraged game" contradict countless articles on here that talk about doing your math, leveraging the value of your primary residence through a HELOC (OPM) to purchase another home and tout a "just get in the game somehow" mentality. In the end of that story we got screwed by a contractor and got bait and switched. We did the math at the time, it all made sense and in the end we got change ordered to death. We took a swing. THAT and when we finished everything we had unexpected urgent medical expenses that we needed to use some of the HELOC for. It sucked but I digress.

Im going to be an open book and give you my numbers that will tell more of the story which to be honest I don't think is as bad as it seems. Let me start all of this buy saying we started this journey by purchasing a $295K SFR by putting down 5% ($14,750). This is the only money we've come out of pocket for on this journey other than all of this interest right now.

HOUSE 1 (SFR): Original Primary residence. We bought at a great price of $295k and after two years noticed its value was actually 440k. When we saw this, we got the house appraised and we took a 90k HELOC out to buy and reno a BRRRR closer to work: Current Value if sold: 500k(+/-) / current loan: $235k @ 3.75% / HELOC $90k @ 7.5% - This is an airbnb that pays for itself and the HELOC costs.

HOUSE 2 (MF): I shouldn't say this was a live in "flip" it was more of a live in BRRRR that we want to move out of at one point and realize the cash flow: Purchase price $625,000 (we put down 3.5% to use the rest of the $ on renos which we wanted to recoup after refi), Current Value if sold: 1,000,000(+/-) / current loan: $575k @ 3.5% / HELOC $118k @ 9.3% (Interest only). We house hack this residence and do not pay much to live here even including the HELOC payments.

So with all of this debt we do have a good amount of equity which all started from a $14,750 purchase. Here are my options (and I'm sure people have others):
1) Sell something.
2) do a lower interest 15 year equity loan at 7% (that won't be interest only) on the home with the higher HELOC interest (which is interest only), pay off that HELOC, and then gradually pay down the loan.
3) I could refi the full loan to a 7 Year ARM at 5.75% which is what I was quoted at.
4) 1031 exchange everything and buy something else
Thanks all

You're killing it. If you can keep buying live in flips and selling them tax free, that's an enormously profitable strategy (with no need for a 1031) and interest rates are irrelevant. I figured there was more to the story with my earlier post.
2 Reply
Nick Causa
OP
Greenwich, CT · Member since 2017 · 81 posts · 8 votes
3y
@Mike Dymski thanks! I can’t sell right now. What do you think about that ARM option? I worry about making the $575k of the loan go from 3.5% to 5.75%. I will however knock out that 9.4% interest only HELOC for good which i like. The move increases my mortgage $600 a month but knocks out the $900+ monthly interest payment. I feel like im so tied to this 3.5% and dont want to lose that.
1 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
Quote from @Nick Causa:

Wow this thread went off, but this is why i love this platform so much. Where else can you get advice on something like this while also feel like an idiot? At the same time, many people weighing in mentioning “don’t play the super leveraged game” contradict countless articles on here that talk about doing your math, leveraging the value of your primary residence through a HELOC (OPM) to purchase another home and tout a “just get in the game somehow” mentality. In the end of that story we got screwed by a contractor and got bait and switched. We did the math at the time, it all made sense and in the end we got change ordered to death. We took a swing. THAT and when we finished everything we had unexpected urgent medical expenses that we needed to use some of the HELOC for. It sucked but I digress.

I'll focus on the bold.

You're right, they do. Doesn't mean their advice is right though. That's the problem. Anyone whose played in '10-12 or after isn't fit to give blanket advice unless they've managed a series of other assets. Most of the knowledgeable people here are from before then or manage significant AUM in other series. They won't tell you to leverage or refi till you die. Always remember nobody, and I mean nobody, severely leveraged survives a downwards cycle. If they come out breathing, they're dead upon the next hiccup.

Debt is equal to risk. How you evaluate risk in physical real estate won't be as linear as a stock. So inherently, always view it as any outright debt.

We need to make a thread of all the stupidity on this board. My favorite is STRs are recession proof. It gets me everytime.
0 Reply
John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 796 votes
3y
How much are you cash flowing in the live and flip? How many units is the MF? Can you now raise the rent on the other units besides the one you live in? Now that the MF is your primary home you should be Able to finance it at a better rate than 9.3.
0 Reply
Nick Causa
OP
Greenwich, CT · Member since 2017 · 81 posts · 8 votes
3y
All in including PITI, expenses, and HELOC payments the 2 unit MF costs $4700/month and we collect $2800 in rent from the other unit. We pay the $1900 to cover the rest. We're increasing the rent to $3000 in August. If we moved out we could rent our unit for $3000 so with that increased rent come August we'd cash flow at $1300 with the way things are. If we refied the whole loan with the 7 year ARM at 5.75% it would drop off the $900 interest only HELOC but add $600 to the mortgage, essentially dropping the total monthly costs by $300 a month. The upside is losing the HELOC because its $900 a month and interest only. I guess to sum up this entire thread: Does it make sense to take the hit and lose the 3.5% rate I'm currently locked in at for the 575K mortgage, all to lose that 118k 9.3% interest only HELOC?
0 Reply
Mitch Davidson
Lender · Asheville, NC · Member since 2020 · 463 posts · 507 votes
3y
Quote from @V.G Jason:

Quote from @Nick Causa:

Wow this thread went off, but this is why i love this platform so much. Where else can you get advice on something like this while also feel like an idiot? At the same time, many people weighing in mentioning “don’t play the super leveraged game” contradict countless articles on here that talk about doing your math, leveraging the value of your primary residence through a HELOC (OPM) to purchase another home and tout a “just get in the game somehow” mentality. In the end of that story we got screwed by a contractor and got bait and switched. We did the math at the time, it all made sense and in the end we got change ordered to death. We took a swing. THAT and when we finished everything we had unexpected urgent medical expenses that we needed to use some of the HELOC for. It sucked but I digress.

I'll focus on the bold.

You're right, they do. Doesn't mean their advice is right though. That's the problem. Anyone whose played in '10-12 or after isn't fit to give blanket advice unless they've managed a series of other assets. Most of the knowledgeable people here are from before then or manage significant AUM in other series. They won't tell you to leverage or refi till you die. Always remember nobody, and I mean nobody, severely leveraged survives a downwards cycle. If they come out breathing, they're dead upon the next hiccup.

Debt is equal to risk. How you evaluate risk in physical real estate won't be as linear as a stock. So inherently, always view it as any outright debt.

We need to make a thread of all the stupidity on this board. My favorite is STRs are recession proof. It gets me everytime.
Wow. "All the stupidity on this board." Maybe you create your own forum then.
2 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y
Quote from @Mitch Davidson:

Quote from @V.G Jason:

Quote from @Nick Causa:

Wow this thread went off, but this is why i love this platform so much. Where else can you get advice on something like this while also feel like an idiot? At the same time, many people weighing in mentioning “don’t play the super leveraged game” contradict countless articles on here that talk about doing your math, leveraging the value of your primary residence through a HELOC (OPM) to purchase another home and tout a “just get in the game somehow” mentality. In the end of that story we got screwed by a contractor and got bait and switched. We did the math at the time, it all made sense and in the end we got change ordered to death. We took a swing. THAT and when we finished everything we had unexpected urgent medical expenses that we needed to use some of the HELOC for. It sucked but I digress.

I'll focus on the bold.

You're right, they do. Doesn't mean their advice is right though. That's the problem. Anyone whose played in '10-12 or after isn't fit to give blanket advice unless they've managed a series of other assets. Most of the knowledgeable people here are from before then or manage significant AUM in other series. They won't tell you to leverage or refi till you die. Always remember nobody, and I mean nobody, severely leveraged survives a downwards cycle. If they come out breathing, they're dead upon the next hiccup.

Debt is equal to risk. How you evaluate risk in physical real estate won't be as linear as a stock. So inherently, always view it as any outright debt.

We need to make a thread of all the stupidity on this board. My favorite is STRs are recession proof. It gets me everytime.
Wow. "All the stupidity on this board." Maybe you create your own forum then.
Maybe you should quit being so sensitive, unless this is the exact stuff you push and promote that leave people stuck like Nick.
0 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Mitch Davidson:

Quote from @V.G Jason:

Quote from @Nick Causa:

Wow this thread went off, but this is why i love this platform so much. Where else can you get advice on something like this while also feel like an idiot? At the same time, many people weighing in mentioning “don’t play the super leveraged game” contradict countless articles on here that talk about doing your math, leveraging the value of your primary residence through a HELOC (OPM) to purchase another home and tout a “just get in the game somehow” mentality. In the end of that story we got screwed by a contractor and got bait and switched. We did the math at the time, it all made sense and in the end we got change ordered to death. We took a swing. THAT
This biggerpocket forum is known to be dangerous (at least for me) and has to be regulated by SEC,FDIC, you name it lol.
All advice here must describe the risk clearly and capitalized with full disclosure.

in essense,
Any variable-rate debt such as HELOC is only useful when mortgage rate is low, when the rate hikes, either sell or refinance to lower rate yield.
1 Reply
Mitch Davidson
Lender · Asheville, NC · Member since 2020 · 463 posts · 507 votes
3y
Quote from @Nick Causa:

Wow this thread went off, but this is why i love this platform so much. Where else can you get advice on something like this while also feel like an idiot? At the same time, many people weighing in mentioning "don't play the super leveraged game" contradict countless articles on here that talk about doing your math, leveraging the value of your primary residence through a HELOC (OPM) to purchase another home and tout a "just get in the game somehow" mentality. In the end of that story we got screwed by a contractor and got bait and switched. We did the math at the time, it all made sense and in the end we got change ordered to death. We took a swing. THAT and when we finished everything we had unexpected urgent medical expenses that we needed to use some of the HELOC for. It sucked but I digress.

Im going to be an open book and give you my numbers that will tell more of the story which to be honest I don't think is as bad as it seems. Let me start all of this buy saying we started this journey by purchasing a $295K SFR by putting down 5% ($14,750). This is the only money we've come out of pocket for on this journey other than all of this interest right now.

HOUSE 1 (SFR): Original Primary residence. We bought at a great price of $295k and after two years noticed its value was actually 440k. When we saw this, we got the house appraised and we took a 90k HELOC out to buy and reno a BRRRR closer to work: Current Value if sold: 500k(+/-) / current loan: $235k @ 3.75% / HELOC $90k @ 7.5% - This is an airbnb that pays for itself and the HELOC costs.

HOUSE 2 (MF): I shouldn't say this was a live in "flip" it was more of a live in BRRRR that we want to move out of at one point and realize the cash flow: Purchase price $625,000 (we put down 3.5% to use the rest of the $ on renos which we wanted to recoup after refi), Current Value if sold: 1,000,000(+/-) / current loan: $575k @ 3.5% / HELOC $118k @ 9.3% (Interest only). We house hack this residence and do not pay much to live here even including the HELOC payments.

So with all of this debt we do have a good amount of equity which all started from a $14,750 purchase. Here are my options (and I'm sure people have others):
1) Sell something.
2) do a lower interest 15 year equity loan at 7% (that won't be interest only) on the home with the higher HELOC interest (which is interest only), pay off that HELOC, and then gradually pay down the loan.
3) I could refi the full loan to a 7 Year ARM at 5.75% which is what I was quoted at.
4) 1031 exchange everything and buy something else
Thanks all

Hey @Nick Causa. I think you should pretty happy that you took the swing! While many of your friends and neighbors thought about it, you went ahead, knowing there was a risk that it could go wrong. And if your guests are paying all the bills for property 1, including the HELOC interest, and if your guests or tenants are paying for most of the multi-family home you live in (which would suggest that it'd pay for itself 100% if you rented out the unit you live in), I don't agree that the high HELOC rates mean you need to sell. Regarding the 9.3% HELOC, you may qualify for a fixed-rate equity loan. Discover is offering me one right now, with a rate of 7.24%. It's a 30 year amortization plan, and not IO. If your HELOC is the type that's IO for the first 10 years, a 2% reduction in the rate should mean a slightly lower payment even though the new loan is not IO.

0 Reply
Nick Causa
OP
Greenwich, CT · Member since 2017 · 81 posts · 8 votes
3y
@Mitch Davidson thanks Mitch. I explored that option and was quoted a similar rate. Do you think thats better than refinancing the entire loan to 5.75% and lose the HELOC altogether? There may even be enough equity to pay off the other heloc if i went that route.
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