All Forum Posts by: Ryan Jacques

Hi all, I just received the below term options on a DSCR new purchase loan (780 credit score). I'm curious to learn if these seem in the reasonable range including the fee amounts. I'd also like to ask if the rate difference between 30 fix and 5/6 Arm is now typically less than 1%. I thought it use to closer to 1% in the past, not closer to .2% like this one.

Option 1:

30 Year Fixed
Loan Amount $202,500.00
LTV 75%
Discount Points %0.00
Prepayment Penalty (3/2/1)
Interest Rate % 8.225
Origination Fee % 0.00
Underwriting Fee $1,645.00
Monthly Mortgage Payments $2,018.76
Broker Fee % 1.25
Cash From Borrower $78,081.01

Option 2:

5/6 ARM
Loan Amount $202,500.00
LTV 75%
Discount Points %0.00
Prepayment Penalty (3/2/1)
Interest Rate % 8.025
Origination Fee % 0.00
Underwriting Fee $1,645.00
Monthly Mortgage Payments $1,990.40
Broker Fee % 1.25
Cash From Borrower $78,052.65

@Wyatt Wolff I was under the impression that a traditional HELOC on a free and clear short term rental property is not easy to come by. I guess I'm also not sure what the difference is between a LOC on the property versus a business line of credit that is secured by the property and loan amount based on property value.

Thank you all for the guidance! I should have clarified a few key pieces of information that I now understand were important to include. This is a business line of credit not a traditional HELOC that is based on the STR business plan/projections, however, the amount is based on the property appraised value up to 80%. They will allow the draw period to extend another 12 months if I pay down draw after 12 months (so 24 months at least). They know it's a rental and is free and clear. Interest rate is WSJ Prime with no margin over.

The closing costs still seem high, but maybe that is more typical for this loan type. I'm just remain concerned that a DSCR cash out refi will be on better terms, however, I don't know how much of the full amount I will actually need and when I will use it so a LOC seems more flexible for my situation (except for the upfront $2500 close fees).

Hello BP Family, I recently opened my first STR property, which is owned free and clear. I'd like to use the equity to invest in additional properties and received the below loan terms from my local credit union. I'm struggling to determine if it is worth shopping around for another loan type such as a DSCR cash out refi or if these terms are going to be better than looking at the DSCR or other routes. Any guidance is much appreciated

Loan Terms: Line of Credit up to 80% value (~$100,000); 12 month draw period with variable rate set to at Prime rate (currently 8.5%) and interest only payments required. After 12 month draw, converted to fixed (prime rate at that time) based on 20 amortization schedule with a 5 year loan term. No Pre payment penalty. Bank will revisit terms after 5 year term if rates are better. Estimate closing costs of $2,500.  

My Scenario:  Credit Score 690-710.  I will pay off the loan within 2-3 years because I will need to sell the property in that time period to avoid cap gains taxes. I don't know the next property(ies) yet so the flexibility of the line of credit is very important.