Staten Island, NY · Member since 2015 · 265 posts · 59 votes
hello all, I currently have a 30 year fixed 3.0 rate on my primary SFH residence. Paying about 1250 a month. I have close too 200k in equity. Would it be smart to do a VA cash out refinance to a 30yr 3.8 rate and pay around 1,800 a month? I would be getting 100,000k cash at closing. ( Not taking full amount of equity).
Goal: Renovate me basement and possibly purchase a mixed use property. Thoughts? HELOC better?
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
8y
I see a similar question to this on here almost daily- I don't know why people gravitate towards cash out refis without considering a HELOC. Helocs close for free- in many cases you don't even have to pay for an appraisal. You can pull WAY more equity out, you don't pay interest until you draw on it and you can do anything you want with the funds.
Sure, you might be able to get a bit lower interest rate, but by the time you pay closing costs and interest while the money is sitting in your savings account, you've likely spent more on it than the rate savings could ever be.
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
8y
Hey @Eric DeVito, I know nothing about your need for this renovation, your real estate market or your personal financial situation, so that's tough for me to say. Since you asked my two cents, if you don't NEED to renovate, I'd put that money to work for me and pick up as many (great deals on) rentals as I could get. If you have cash flowing rentals that appreciate, they will pay you and your change your family for generations. A sweet man cave in your basement can't do that.
If you have four kids sharing a bedroom and need more space, that changes the conversation, of course.
Staten Island, NY · Member since 2015 · 265 posts · 59 votes
8y
@Corby Goade I gotcha. The basement doesn't have to be done right now. More of a luxury to have it finished I suppose. That being said I like the idea of using a HELOC to get rental property. Now it seems like you use the BRRRR method if I'm not mistaken?
Idk if I want to go that route on my first deal. I would feel more
Comfortable getting a multi-family property that doesn’t really need work and is cash flowing already. Where do you like to invest?
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
8y
Yes, we were BRRRRing before we knew what to call it! I always invest locally- I want to be able to check out the property, know the contractors and know the property. Especially as a new investor, I's recommend that you buy something near where you live so that you can learn the process and be a part of every step. The further removed you are from your investment, the less you learn.
Staten Island, NY · Member since 2015 · 265 posts · 59 votes
8y
@Corby Goade I see, makes sense. Hard for me to do locally but def an hour away I can find good rental properties. Probably won't be a BRRRR but the idea is very interesting. Would like something not to difficult just to get my feet wet.
Glendale, AZ · Member since 2017 · 9 posts · 2 votes
8y
@eric
@Eric DeVito Check out PenFed. I just did a 15yr interest only HELOC with a 4.25% rate and no upfront closing and no appraisal. The only stipulation is I pay for the closing costs if I pay it off in two years. BTW, the closing costs were only $130. Not a big risk at all
I already have a HELOC open with Santandar Bank, 5.5 variable rate I believe. At the time it was the best rate after speaking to several banks. I have to go over my documents though. I have not used the HELOC at all yet. Is it possible to get another HELOC if I find a better deal for instance with PenFed. I know if I close my HELOC prior to 3 years with Santandar Bank their is like a $2000 penalty. (Closing cost fee and a early termination fee)
Real Estate Investor · Greenwell Springs, LA · Member since 2013 · 37 posts · 2 votes
8y
Is it possible to refinance a home to a traditional 30 year term after six months seasoning if the property is currently in LLC’s name? I have my personal residence in my name and three rentals in LLC.
Two rentals have 5/20 arms and the other is paid for with heloc.
Investor · Somerville, MA · Member since 2014 · 15 posts · 4 votes
8y
This is just information, not a vote or suggestion one way or another. With the new tax laws, interest on HELOCs will no longer be tax deductible. Whichever route you choose, remember to take taxes into account to determine the full cost.
Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes
8y
Check out Tower Federal Credit Union. They do 100% LTV HELOCs. You have to become a member of the credit union, which you can do by donating $25 to one of the causes they have.
Investor · Northern Virginia · Member since 2017 · 159 posts · 59 votes
8y
@Eric DeVito..I vote HELOC. A few questions go beyond your "Why" but what is the most important action right now. I like the idea of gathering other properties and using the cash flow to fund the basement remodel. Excitement is always good in this business because it keeps you going. I wish you well in your decision.
This is just information, not a vote or suggestion one way or another. With the new tax laws, interest on HELOCs will no longer be tax deductible. Whichever route you choose, remember to take taxes into account to determine the full cost.
From what I read, you can deduct the interest on HELOC , if you use it for investment purposes .
If I already have a HELOC open with a bank can I open another with a different institution or is that not possible?
That is the question you should ask a lander directly. Santander bank is already in a second lien position and I doubt any other institution would want to be in third. It doesn't hurt to ask. Just get on the phone with, let's say TD bank and explain your situation. Evening has to be transparent otherwise it is considered a mortgage fraud.
This is just information, not a vote or suggestion one way or another. With the new tax laws, interest on HELOCs will no longer be tax deductible. Whichever route you choose, remember to take taxes into account to determine the full cost.
As I understand it, the interest expense is traceable in that if it's used to acquire other property it is actually deductible. As always, check with an accountant!
Good call. Definitely my mistake. It seems silly in retrospect, but I wasn't even thinking about the HELOC being used as an investment despite describing the HELOC in context of being used as an investment. Thank you both for correcting this.