Issaquah, WA · Member since 2015 · 2 posts · 0 votes
hello, first post, thanks for any help.
My home is worth 1.25M, loan is only 350k, tried to get heloc, but bank will only give 200k because of my income.
So I have about 900k in equity, was hoping to get a heloc for 500-600k to buy properties at auction. What other options do I have to pull the equity from my home to get a larger amount?
I have owned 1 investment property which I rented for 2 years, and sold for 225k gross profit. Current home I bought from bank as foreclosure, was a house being constructed when builder went bankrupt, I bought and finished it. This home is up 500k from what I have into it.
So this is how I have so much equity in this house but need a way to pull the equity out.
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
11y
@Dok Kim first of all congratulations to your investments so far, looks like you have a good eye for opportunities. It is an interesting scenario and there are a couple things you can try, but first of all let me say this: maybe it's a good thing that your bank is limiting you to 200k. After all you have to be able to afford the monthly payments. There is a difference between equity and cash and in your case you just borrow against equity.
This is essentially what got us into trouble as a nation in 2008 - the equity was there, appreciation was good, we know the rest of the story. If you've done the math and its no problem for you the first thing I would try is to talk to differnt banks, especially small local banks and credit unions. it may take two or three, it may take twenty before you find what you want. But it's like shopping for any other product: if you have not bought it before you may not know which store has exactley what you want, so you keep on shopping.
The other thing would be to refinance your home and take a cash out - esentially you get a new mortgage to pay off the old one and for the difference you get a check. The whole thing is amortised (payed back) typically over 30 years. Again the loan to debt ratio will come up, but that's not a bad thing. The way I look at it you have 200k more to start out with than most people. In many good rental areas in the US that's the down payment for 8 single family homes.
Final thought: they say not having (much) money makes you a better investor. I think it's true. You work harder to find better deals and after all you make your money when you buy. After that its just mechnanics.
Issaquah, WA · Member since 2015 · 2 posts · 0 votes
11y
Will definitely look for other lenders to see what they can do.
Wouldn't a cash out refi, only get me the same amount of cash, 200k? since I qualify for a 550k loan and 350k balance on existing loan would only give me 200k extra. Plus my current interest rate is 3.375% and my plan is to stay in this home, so wouldn't want to refi at a higher rate.
Has anyone heard of a business equity line of credit, looks like these can go up to 500-600k and you use the equity in your home. But not sure if these take into account income to arrive at the loan amount.
Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
11y
If you can get a rental property with cash and your 200K, after a seasoning period you can start to use your rental income to qualify for a larger loan.
@Marcus Auerbach I agree this is a bit of a blessing in disguise. It does lessen the upside, but it also makes it significantly less likely that there is a danger of losing the home if a deal goes bad.
Will definitely look for other lenders to see what they can do.
Wouldn't a cash out refi, only get me the same amount of cash, 200k? since I qualify for a 550k loan and 350k balance on existing loan would only give me 200k extra. Plus my current interest rate is 3.375% and my plan is to stay in this home, so wouldn't want to refi at a higher rate.
Has anyone heard of a business equity line of credit, looks like these can go up to 500-600k and you use the equity in your home. But not sure if these take into account income to arrive at the loan amount.
Hello Dok,
The cheapest interest rate you'll get is with a primary residence. Say for example you do refinance your home and the new rate is 4.25% and you have a total loan amount 720K. You'll be paying about $412 more a month or $4,944.00 a year. If you can buy a homes like you have done in the past and you make as much money as you've stated why not eat 5k a year to make 10 times more.