Heloc vs cash out refi on investment property
Member since 2022 · 3 posts · 2 votes
Hello beginner investor here! We bought a short term rental property in December in Montana the house only had the top floor done so we bought the house and just completed the bottom floor, creating 300k equity. Now that we have finished we want to tap into that equity to buy more properties. We got our interest rate at 3.65% so I was just going to do a heloc but can not find a bank to do this on an investment property. PenFed just stopped in April, so we just missed it . Our new rate with a cash out refi would be 6.5%… I need advice on what to do? Our credit scores are over 760 does anyone know of any banks offering helocs on investment properties still?
Also we did heloc on our primary to purchase this home, so that’s why we aren’t going that route.
Any advice would be so appreciated! Thanks in advance!
Hi Aubrie,
I actually called around to most local banks and credit unions a few months ago, and the table below is what I found for HELOCs on both primary residences, and the lower part is for rental properties. Most will do them, so I'd go for it! It's just expensive to do a cash-out refinance right now, if your mortgage is more than 6 months old. My advice would be to skip the refi and apply for one of the HELOCs below. I ended up getting a MECU Home Equity Loan and had a great experience, let me know if you would like recommendations for who specifically to talk to at each bank.
Good luck!
|
Bank |
Rates ) |
Length |
Fees |
LTV |
Annual Fee |
|
Clearwater |
Prime+1% |
7 years |
$500-1,500 |
? |
? |
|
Opportunity Bank |
Prime+0.5% |
5 years |
0.5% origination |
75% |
? |
|
Stockman’s |
Prime+0.7% |
10 years |
$1,500 |
? |
? |
|
Mountain America |
1.99% for the first 6 months, after that it fluctuates, is currently at 3.75% |
Open for 10 years, then closed for repayment for next 10 years. |
No origination fee, $275 fee for early termination fee. |
None! |
|
|
Missoula Educator Credit Union-NOTE: THESE ARE HOME EQUITY LOANS ONLY |
Range from 3.75% to 5.25% (assuming 720+ credit) depending on how long of a term you pick and the LTV. |
Depends |
$550 total |
We can go up to 90% on owner occupied properties. |
? |
|
First Security Bank |
For 750+ credit score, Prime+0.25% |
15 year |
Around $1,000 |
75% |
? |
|
Investment Property HELOCs |
|||||
|
First Security Bank |
For 750+ credit score, Prime+1.25% |
15 year |
Around $1,000 |
65% |
? |
|
Missoula Educator Credit Union- NOTE: THESE ARE HOME EQUITY LOANS ONLY |
Range from 3.75% to 5.25% (assuming 720+ credit) depending on how long of a term you pick and the LTV. There is also another 0.25% added to the rate if the property is non-owner occupied. |
Depends on how long of a term you pick and the LTV |
$550 total |
80% LTV |
? |
Hi Aubrie,
I actually called around to most local banks and credit unions a few months ago, and the table below is what I found for HELOCs on both primary residences, and the lower part is for rental properties. Most will do them, so I'd go for it! It's just expensive to do a cash-out refinance right now, if your mortgage is more than 6 months old. My advice would be to skip the refi and apply for one of the HELOCs below. I ended up getting a MECU Home Equity Loan and had a great experience, let me know if you would like recommendations for who specifically to talk to at each bank.
Good luck!
|
Bank |
Rates ) |
Length |
Fees |
LTV |
Annual Fee |
|
Clearwater |
Prime+1% |
7 years |
$500-1,500 |
? |
? |
|
Opportunity Bank |
Prime+0.5% |
5 years |
0.5% origination |
75% |
? |
|
Stockman’s |
Prime+0.7% |
10 years |
$1,500 |
? |
? |
|
Mountain America |
1.99% for the first 6 months, after that it fluctuates, is currently at 3.75% |
Open for 10 years, then closed for repayment for next 10 years. |
No origination fee, $275 fee for early termination fee. |
None! |
|
|
Missoula Educator Credit Union-NOTE: THESE ARE HOME EQUITY LOANS ONLY |
Range from 3.75% to 5.25% (assuming 720+ credit) depending on how long of a term you pick and the LTV. |
Depends |
$550 total |
We can go up to 90% on owner occupied properties. |
? |
|
First Security Bank |
For 750+ credit score, Prime+0.25% |
15 year |
Around $1,000 |
75% |
? |
|
Investment Property HELOCs |
|||||
|
First Security Bank |
For 750+ credit score, Prime+1.25% |
15 year |
Around $1,000 |
65% |
? |
|
Missoula Educator Credit Union- NOTE: THESE ARE HOME EQUITY LOANS ONLY |
Range from 3.75% to 5.25% (assuming 720+ credit) depending on how long of a term you pick and the LTV. There is also another 0.25% added to the rate if the property is non-owner occupied. |
Depends on how long of a term you pick and the LTV |
$550 total |
80% LTV |
? |
Wow thank you so much! I will be contacting these banks today, I really appreciate it!
Few to zero HELOCs products on non owner occupied exist. @Keith Miller provided OWNER occupied lenders.
1. Get a local Realtor to give you three comparables you need them as most HELOC lenders only use AVM or automated valuations.
@Aubrie Caton in addition to the aforementioned banks, America First Credit Union was also doing HELOCs on rental properties as of about a year ago (I don't know if they're still offering them or not).
As you probably already know, HELOCs are usually variable rate, and rates are increasing (and will likely increase substantially in the future), so it's important to be clear about whether there is a maximum rate the HELOC can go to, and what that rate would be....Once you know the maximum rate, you'll want to run a "worst case scenario" financial model where your HELOC goes to its maximum rate. ...If an investor isn't basing their decisions on worst-case scenario financial models where adjustable rates max out, then they're risking a 2008-style disaster where their formerly affordable monthly payment balloons into an un-affordable payment as rates rise.
Good luck out there!
I'm in a similar situation to the OP.
@Keith Miller
- I just sent an email to Clearwater, but I noticed Opportunity Bank, Stockman's, and MECU are all in MT. Do you know if they are only doing business inside of MT? I'm in the Atlanta, GA region. Before I email all of them, I thought I'd ask if you happened to have already asked that question. :) lol
To clarify a few things, the HELOCs listed above are for both owner occupied and investment properties. Owner occupied is the top part of the list, investment properties are below. These banks are mostly regional credit unions in Montana, although Mountain America Credit Union has branches all over the Western US, and does offer HELOCs on investment properties. @Andrew Thomas I doubt any of the banks listed offer loans in GA, sorry.
@Keith Miller , Clearwater called me back yesterday, and you are correct, they only loan for property in MT.
Maybe I need to look for a long distance deal... I hear Montana is beautiful, "especially this time of year". :) lol
Winter is WAY too cold for my southern blood though. We get snow about once a year. Maybe three inches, if it's a bad winter. :O hahaha
@Andrew Thomas Yeah MT is a great market in my opinion, our growth rate per capita was one of the largest in the nation in 2021. But every winter we have, we have Southerners and Californians leaving, some people can't handle it. You just gotta start skiing or some other outdoor activity in the winter, then you'll get used to it.