I am needing some advice as I am new to this!
So I'm trying to get into real estate investing. I own my own property that I currently live in. I went to the bank to see if a can get preapproved to buy and rental property. Going to use HELOC to put a downpayment and Reno's and closing cost. Than the word Collateral mortgage came out. Questioned the bank about it and they said yes we have to use your home as a collateral mortgage in order to use the line of credit. I can go conventional but I am not able to use the line of credit if I do so. So my question is. Is it a good idea to try to brrrr using a collateral mortgage!? Has anyone does this before doing a brrrr? I'm also due for a renewal.
Borrowing money from a bank is never a problem as long as you can pay it back. I started off with my first house doing it the same way as you and I ended up ok. The ARV appraisal came in lower than we expected ( bank appraisal) but we ended up renting it out for a positive cash flow then sold it 8 years later for a nice chunk of cash.
A HELOC (Home Equity Line of Credit), is, by definition, collateral.
From the way I'm reading it, you asked for a HELOC and the bank said it has to be on your existing property, but you want it on the property you're purchasing, to finance renos and downpayment. That's the same as getting a second mortgage to cover closing costs, and a lender won't do it.
As far as going conventional and not being able to use the LOC, I'm confused, as that doesn't make sense. The LOC you get on an existing property can be used however you want. A conventional mortgage on the new property shouldn't affect that.
Once you've renovated and refinanced and it's been six months, you can refinance the new property to 80% of the value anyway so it shouldn't be an issue.