HELOC

9 Replies

@Account Closed

I am surprised no-one answered you Eldon.  Long story short is Yes.  As long as you have equity in a property you can borrow against it.  

Let me tell you how I just did it. So I am not a banker but I have just recently done 1 HELOC and am on to my 2nd, so I can tell you what I know. I just purchased a property for $10,000, in North Dakota, completely rehabed it and am renting it out. Once I put the renters in I immediately turned around and tried to get a cash out refi on it. The plan was going well and a cash out refi would work BUT the banker sucked at his job so I looked locally for another solution and found a HELOC solution.

At my local bank, I found that they were willing do give me a Home Equity Line Of Credit on the property.  AND here is the best part, it cost me NOTHING!!! except the price of an appraisal.  No closing cost, No points, No fees of any kind except for the interest on the line of credit which is only on what I pull out.

Let me know if this helps or if you have any questions.

Glenn

Hi Glen- total rookie here, but we have managed to get into a good equity situation in our first home over the first four years. I am curious about the interest rates and risks with HELOC. Sounds like once approved you can use the credit when you need. Some say there is a market adjustment coming. if our home became worth less, can we still use the entire line of credit? How long is the line of credit good for? if you for some reason had to miss a payment does that mean forclosure?

Thank you for the explaination of the HELOC! We have been approved for HELOC from a local bank and a credit union but both want $400 to open it and are variable interest. Still deciding if this makes sense. Thanks again!

@Nancy Bachety

Sorry for the slow reply.  You understanding is on the mark, but as you said each bank/credit union may vary. Yes we did talk to a lot of banks in my area and unfortunately we live in a small town so the lending options are limited but we found that Alerus was more than willing to work hard for our business.  So it comes down to contacting a bunch of lender and seeing who has the best deal.

Other than not being able to close on the loan in person, are there any issues with getting a HELOC with a bank that is not in the same state as the property? I'm assuming that you could go with an out-of-state lender and freely spend the credit line on properties in another state.

Also, if they ask you to make a mandatory draw on the day you close, could you not just go back the next day and repay the money back?

@Account Closed My bank (Navy Federal) told me that if I wanted to do HELOC, they would go with 80% my purchase price(which was below the market). However, if I would wait 1 year - they would separately appraise the property and go with the 80% of that appraised value(which would be higher).

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