Stockton CA Help "Im stuck"
Hi everyone
So I'm your typical newbie i want to start and i have a lot of wants and a lot of drive to start my investing journey but i'm stuck and don't know where to start.
My goal is buy and holds. I have my first home and i would love for someone to explain to me a "heloc" in dumb dumb terms!
thank you
Hi German,
A HELOC is a 2nd mortgage you take out on your existing home. This line of credit is revolving meaning you can use it when you want to pay it back and reuse it. For example your house in Stockton. Say the house is worth $250k you owe $150k on your first mortgage. A bank may extend you an equity line of credit up to 80% of the appraised value of your house. So, in this case, you can get a $50k line.
You can now use the $50k as a down payment on your investment property. You will also want to make sure you don't overextend yourself by doing this. I think you should keep the LTV under 70% if you do this.
Originally posted by @German Aguilar:
My goal is buy and holds. I have my first home and i would love for someone to explain to me a "heloc" in dumb dumb terms!
Simplest terms possible: A HELOC is a credit card that is secured by a house, meaning if you don't pay your credit card bill - they get to foreclose on you. Typically, because of this, it's less risk than a typical unsecured credit card and you get a better rate.
@Chris Mason and @Frank Wong i appreciate both of your guys response to my question i believe i have a good idea of what is now.
thank you
Hi folks, just to further give details. HELOCS , just like Chris said is like a credit card attached to your home. Now depending on the lender that is offering it, the loan payments can be stretched out to 25 years or 30 years. The first 10 years of the HELOC terms are usually interest only payments, meaning smaller payments but it only pays towards the interest and not pay down the loan, but check with the bank that is offering the HELOC, because they have many ways of doing a promotion. Hope this helps.
Hi @German Aguilar, I agree with @Frank Wong and @Chris Mason but will also include the following benefits of a HELOC:
- Lower interest rates
- No restrictions on use of funds
- Flexibility
- No usage fees
- Save on closing costs
Also, if you haven't already, checkout this article regarding HELOCs, here's a link to it: How to Use a HELOC to Buy Real Estate