Tapping into Rental Property Equity without cash out refi

16 Replies | Charlotte, North Carolina

I have an odd situation and I'm hoping someone may know of a solution.

I have a Townhome rental property that has FHA mortgage with a 2.625% rate and I was able to get the PMI removed through a fast track refi earlier this year. I have about 130k in equity in it that I'd like to tap into to help towards purchasing another property. I haven't had any luck finding lenders who will offer a HELOC on it as a rental property, and the solutions I keep being presented with are a cash out refinance options. However, if I do that, I certainly wouldn't be able to keep the 2.625% rate and my monthly expenses would go up quite a bit.


Anyone have any creative ways to reach that equity?

There are HELOC for investors you need a 721 score and 75% LTV. Remember HELOCs are not a permanent long term loan solution- max caps are 18, and if you don't have a balance and the market goes south they get closed.

Originally posted by @Caroline Gerardo :

There are HELOC for investors you need a 721 score and 75% LTV. Remember HELOCs are not a permanent long term loan solution- max caps are 18, and if you don't have a balance and the market goes south they get closed.

Thank you! Yes I'm trying to find a lender that offers a HELOC for investors, having a hard time here with local banks and credit unions. Looking to tap into the equity for cash purchases to BRRR with. Definitely understand the unused ones get closed when the market goes downhill.

I still have full time W2 and a 830 credit score, so getting qualified likely not an issue, just need to find someone who offers them.

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@Caroline Gerardo Do you have any lender names?  The post below is something I put up on a wider reaching forum on BP a day ago.  Can you add to it?  HELOCs are a good source of funding if you aren't going ot have the money in play constantly.  With a cash out refi, yes you can get a lower rate.  But if you are between investments you are paying on funds you aren't using.  SO its a good tool to have.

This is a little premature since I haven't closed on anything yet but here are the results of my research and input from BP so far. Keep in mind I concentrated on lenders who are licensed in North Carolina and do lines on NOO. I still need to contact the ones other have given me. The last time I contacted BoA and PNC they said only on primary residence, not NOO. I tried to include phone numbers etc but the site said I couldn't do that.

BMO Harris

Edwin Adorno

Will do up to 3 HELOCs. This is in addition to mortgages you have

70% LTV

PenFed

Will do up to 4 HELOCs but limit the number of properties you can have in your name to 4 I think.

85% LTV

TD Bank

Will do up to 4 HELOCs. I believe they do count mortgages in this total

70% LTV

@Nick Belsky gave me 2 that I need to contact

Symmetry Lending

Quorum FCU

And Nick might be able to help you if you are in other states

Vinay Kolluru gave me 3 I need to contact

State Employees Credit Union (I'm guessing you would have to be a state employee)

Coastal federal credit union

Fidelity Bank NC

And if you or anyone in your immediate family works for Food Lion try Lions Share CU. But they limit you to only 2 investment properties in your name

SpringEQ 721 MORTGAGE FICO (not consumer one) 70% ltv; Symmetry same; Fremont case by case they are picky by COUNTY location; Velocity pricy; PENFED no LLC and don't change it back they will rip the rug from under you; Merchants Bank Indiana only in Midwest; Farmers and Merchants if you have big deposits to give them; many others depends on the location of subject.  

I don't broker HELOC's. No juice in the colossal amount of work needed. I refer and provide the novel as courtesy.

All HELOCs are FULL DOC full qualifying 2 years job/income stream/ no declining income/ they want perfect credit/ needs to be earning rents and on taxes/ they don't use proposed STR income/ a HELOC is to a live human person not to an entity - this is a hard stop.

All the banks are OUT- Wells and Citi closed the HELOC origination divisions all together, too risky.

I agree getting a HELOC in a personal name has limited options. I called over 90 lenders, big banks, local banks, CUs. Except for the few positives responses I listed above most said absolutely not. Some blamed it on COVID. I think it's more about the cost vs the reward for the lenders. But the door is not closed on this.

There are business lines of credit you can get in the name of your company but for most investors those are even harder to get. 1.25 DSCR. Positive income on your business taxes. And let's face it, if you do it right none of us show much on the way of pass through income. And you have to redo it every year or two. Gets real expensive and time consuming. I spent 2 months with US Bank trying to pull a deal together. Eventually it fell through after they lied to me.

But if you have a decent credit score and verifiable income it is doable. I'd start with PenFed. 

I agree getting a HELOC in a personal name has limited options. I called over 90 lenders, big banks, local banks, CUs. Except for the few positives responses I listed above most said absolutely not. Some blamed it on COVID. I think it's more about the cost vs the reward for the lenders. But the door is not closed on this.

There are business lines of credit you can get in the name of your company but for most investors those are even harder to get. 1.25 DSCR. Positive income on your business taxes. And let's face it, if you do it right none of us show much on the way of pass through income. And you have to redo it every year or two. Gets real expensive and time consuming. I spent 2 months with US Bank trying to pull a deal together. Eventually it fell through after they lied to me.

But if you have a decent credit score and verifiable income it is doable. I'd start with PenFed. 

I have done the same thing, with the same purpose as my quest. 

I've gleaned these lenders from the kind people on BP. I have used PenFed and TD Bank for HELOCs on investment property. Post back if you find another lender who serves you well, and I will add them to my list and pay it forward. These were largely sourced pre-CV19, so eat the fish and spit out the bones.

The DTI percentage range varies by lender, and is less than what you will find for an owner occupied property, due to lender risk. While qualifying for a HELOC is dependent on your home equity and your credit score, good or excellent credit makes it easier to qualify. A good average to shoot for is 620 or higher. Plus, the better your credit score, the better your interest rate.


Ridge Lending All in One, first position HELOC

AFCU does 80% LTV on NOO. Utah

Americafirst 80% LTV on noo 65% LTV Utah

Arvest Bank AR, OK, AL, MO

Bank of West (BNP Paribas) 60% LTV ELOCs

BB&T will loan on a rental portfolio

BBVA, now PNC

Bellwether NH and MA 85% to 100%, draw 10 yrs

Boeing employee credit union

California: Cal Coast Credit Union and Fremont Bank

Citizens Bank -Minnesota, only in-state. Kyle Potswald

Citizens first position HELOC

CMG a financial 70% LTV

Consolidated CCU, high LTV NOO LOC, OR, WA

East West Bank, up to 60% LTV with "no docs”

Figure 80% on a rental, not in LLC

FirstBank CO and AZ 75% LTV

First Florida Credit Union https://firstflorida.cumortgag...

First Commonwealth

First Midwest, up to 90% Chicago area

First Republic - California

Fulton Bank

GFA Federal Credit Union 10 yr draw, 10 yr repay, MA

Granite State CU, NH 90-100%

Great Lakes Credit Union

Hanscom FCU, Florida

HSBC 70%, for premier clients only

Horizon, Kalamazoo Michigan

Huntington 75% LTV 5 yr IO product available

Hurst Lending and Insurance Investment property HELOC in Texas. No seasoning. Bridge, portfolio, foreign national and other specialty loan products.

Key Bank, FLorida flexible lender, HELOCs on second
homes and rental properties. 90% LTV on primary.

Mountain America Credit Union in Utah, Idaho, Montana, Nevada, Arizona, New Mexico. 85% LTV, promo rate of 1.99%. Can refinance an existing mortgage on investment property to a shorter term “Mini Mortgage.”

Merchants Bank MN See Pavel Ushakov

PenFed - max 3 other properties, 89% LTV

Quorum Federal Credit Union 80% equity, owned by LLC is OK. 5 year interest only payments. New York State. Tiffany Mazzoccoli. 2021

Regions- yes HELOC but no LOC

River Bank & Trust, AL

SCCU Florida 70% LTV, 6.25% interest only, not LLC

Signature Federal Credit Union 75% LTV

Sound CU "non-owner occupied HELOC, capped at $150K and interest rates are prime + 2%, 3% or 4%, based on credit, not to exceed 70% ltv.”

S&T Pennsylvania

TCF Bank

TD Bank 75% line with FICO about 740

TIAA Direct was EverBank

Troy Bank & Trust, AL

Trustco

Union Bank, specializes in noo HELOC. KCMO, NE

Union Bank, MUFG.

Upstate Bank in Rochester NY, LOC up to 80%

US Bank

Vectra Bank - Colo

Veritex, Texas HELOC

Workers Credit Union, MA 80-100%

WSFS...up to 70% on rental

@Kerry Baird

Great list, I’ve heard of PenFed.

When doing the investment non owner occupied HELOC, will they reappraise the property to see if you have any increased in equity amount or will they use your most recent purchase price and only work with you if you have 10-20% + equity?

Thinking of doing this on a FHA duplex I bought but moved out of that I bought for $285k but it's worth $350k+. The issue is I only have about 4% equity based on purchase price but much more based on actual appraisal potential.

Thanks!

When I spoke with the 3 I'm considering, PenFed, TD and Harris, all of them said a full appraisal is needed. And depending on where you are these can get a little pricey. They used to 400-450 I'm Charlotte. Now they run 750-800. Not a big number but just something the be prepared for. 

I'm in the process of getting a Heloc on an investment property with First Tech Federal. They are CA based but will do deals in other west coast states and I believe a few east coast states. (Mine is an OR property). They will do up to 80% LTV if credit score is 780 or higher. And no physical appraisal needed if loan is less than $250k. Appraisals are running close to $1k in Oregon at the moment!

Pen Fed FCU will go to 80% and Quorum bank will also. However Pen Fed has a limit of 4 properties owned max. including your primary. Quorum doesn't have any limits on properties owned and is much more flexible. 

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@Marc Rice , I have had a small local to me credit union say they would do a desktop appraisal (non interior value) which worked well when I had a bit of renovation going on inside.  Another nearby CU said full appraisal only.  Call and ask, as each CU sets its own values, rates, time horizon and so forth.  HELOCs have a lot of variety.

Here is one more that will do HELOCS on NOO in a personal name or an LLC.

Quorumfcu.org
Mark Panella

925 519 6734

A little pricey. Prime +4.5% and you do have to pay for appraisals and closing costs. But with such a limited pool of lenders it might help knowing these guys.

Symmetry Lending told me they will only do Primary and secondary. No NOO.

Just as an update, I was able to lock in a HELOC on the investment property through Penfed at 80% LTV. They used a real AVM that was pretty close to what I was hoping for and waived the appraisal requirement. Quick and smooth process, finishing underwriting now.

Appreciate the lead Jim and the rest who gave suggestions!