Is it difficult for a retiree w/low income to get a HELOC?

8 Replies

My mother is retired and has ok credit (~700). I'm curious to hear from lenders on how hard it is for a retiree with ~$3K monthly income to get a HELOC? The property is a duplex and has approx value of $800K+, one unit is her primary residence, the other is vacant. We'd use the funds to fix up the building as well as take out money for a down payment on another SFH. In the long run we'd rent both units. I'm guessing that we'd be using about 25% -30% of the value of the home for the HELOC.

I'm hoping that she'd be able to qualify on her own since I'm looking to buy a home and qualify for a home loan myself within the next 6 months. 

~Laquel

@Laquel W. Check with @Chris Mason . I don’t think your situation is that hard to get. The rent for the vacant will be accounted for as an additional income. And if equity is truly at 800k, i don’t think you’ll find it hard as long as you are not over 70% in loan vs as-is price.

Originally posted by @Laquel W. :

My mother is retired and has ok credit (~700). I'm curious to hear from lenders on how hard it is for a retiree with ~$3K monthly income to get a HELOC? The property is a duplex and has approx value of $800K+, one unit is her primary residence, the other is vacant. We'd use the funds to fix up the building as well as take out money for a down payment on another SFH. In the long run we'd rent both units. I'm guessing that we'd be using about 25% -30% of the value of the home for the HELOC.

I'm hoping that she'd be able to qualify on her own since I'm looking to buy a home and qualify for a home loan myself within the next 6 months. 

~Laquel

Hi Laquel,

- Option 1, give it a go with the best HELOC she can find, see how it pans out. You may have to put a tenant in the other unit to make the numbers work. Older folks often have a hard time with the paperwork and the 2017 mortgage industry implicit assumption that everyone is good with computers, help her out.

- I know someone doing stated income HELOCs in Oakland, Marin, and a few other places. It's not the best HELOC in terms of rate (interest rates are always risk based, and stated income is risky for lenders!), etc, but if your mom is getting jammed up because she has income that isn't checking the right boxes to be "counted," it's an option.

- As a last resort if she is truly in dire financial straits, reverse mortgages can have a line of credit component. I'm reading your post as "it would be nice to have a HELOC," not "we absolutely need these funds or else horrible things will happen," so don't do this if that's a correct reading of your post!

@Manolo D. undefined

Thanks @Manolo D.

Thanks for the insights @Chris Mason . I'm definitely handling all the paperwork and stuff for her. Right now the vacant unit needs significant work to be rented out/livable so I cant put someone in it now. I'll be helping her out with the payback but due to buying another home I dont want to be an official backer on her loan.

I'll check with a few different lenders to see what's possible and what rates they're offering! We're not in dire straights by any means but if we decide to keep the building i need to be able to take money out of it to do the repairs and I want to do it in the most optimal way as far as risk is concerned.

~Laquel

I've got a client with a similar issue.  You might be able to find a contractor that will do the work on a payment plan where you'll have to be just a small percentage of the total before putting the home on the market.  The contractor can put a mechanic's lien on the house (or not) to be paid off at closing.

@Leslie Bandy Not such a bad idea. It will be at least +20% of the construction cost though, companies that use payment plans need to tie their business to a lender so they get their cash up front, those lenders charge around 2-3%/mo as well, so costs need to be passed on.

@Manolo D. I don't know the specifics but one of my contractors offered this to me. He said he was able to join a state association's financing program so it sounds like something that may be open to all affiliated CA licensed contractors.

@Leslie Bandy I don’t believe it. the state doesn’t lend small things like that, one of my regular clients is the state, the way they’re structured is not capable of such a vehicle. Some companies mimic or say they are government backed, but so does chase and bank of america, they’re backed with FHA. Still, in all cases, contractors need to pass interest costs, no matter what the scenario is.

As I stated, it was a state association that my contractor belonged to, though not necessarily governmental (as the realtor associations, e.g. Bay Eat, CAR, NAR, I belong to are not government agencies). There were financing charges, though they were quite reasonable. More than a HELOC, less than a credit card.

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