With the real estate market in a rut, I want to buy one or more investment properties. I can take out a HELOC for about $50K for prime minus one. I would use this to put money down and then borrow the rest in an investment loan. However, I don’t want to open too big of a HELOC and restrict my ability to get an investment loan. What is the best strategy and were are some good guides to turn to in this area?
Gloria
Comments
Banks won’t allow you to take out a HELOC for that reason.
They do ask, as part of the application process, what the money is for.
You could open the Line of Credit first…. If they ask what the money is for you can say that it is for an emergency fund or possible investments down the line. These are perfectly reasonable reasons of why someone would want a line of credit. Once you have it, you are free to use the money as you wish. Some lines of credit require an initial minimum draw but you can pay it back with the first month;s payment and then not have a payment on it until you use it. Also, if for some reason, the financing on the investment property falls through, you still have the line in place for the next property that catches your eye.
You can get a HELOC for any reason, the bank does not care as long as you qualify.
This is a good strategy, let your mortgage originator figure out your specific terms. In other words- talk to the person who will be handling the purchase financing for you and they can review your situation and see if there should be a limit on the HELOC you apply for.
In this market, if you can get a HELOC, get it. Lenders are starting to make changes based on dropping values. They can cut off your draw privilege and/or reduce your line amount at will if they feel their investment is in danger, and it doesn’t take much convincing.
Be sure to have a realistic exit strategy. Don’t depend on loan products being available tomorrow that exist today, especially for investors.
no, its better to pull out cash out of your home , and only have one mortgage, because the heloc will have a high interest rate, there are plenty of mortgage companies that can go to 90 or 95% ltv
