Oceanside CA · Member since 2018 · 4 posts · 0 votes
Hey all, got a question about HELOC vs home equity loans.
Lets say I want to buy and investment property that is $30,000. (For this lets assume it will cash flow, etc) The down payment for this property lets say is $6,000.
Lets say I own a home worth ~475,000 and I owe ~445,000 on the mortgage. Would I be able to borrow against my current home to fund the $6k down payment?
Lets say it was determined the property need $10,000 in repairs for a total of $40,000. If I didn't have or didn't want to spend the cash, could I borrow $8k against my house? Would a seller consider that a down payment?
Finally, what is the difference between a HELOC and the home equity loan? I am having trouble sorting that out.
It looks like you are about 94 ltv so you don’t have enough equity to get a heloc. You typically need to be less than 80% ltv. If you had a house worth $100 k and you owed $60k, you could get a heloc for $20 k. A heloc is a line of credit which works a credit card where you have access to it when you want and only pay interest when you advance on it. A home equity loan is an installment loan like a car loan where you get the funds upfront and have a monthly payment until it is paid off.
It looks like you are about 94 ltv so you don’t have enough equity to get a heloc. You typically need to be less than 80% ltv. If you had a house worth $100 k and you owed $60k, you could get a heloc for $20 k. A heloc is a line of credit which works a credit card where you have access to it when you want and only pay interest when you advance on it. A home equity loan is an installment loan like a car loan where you get the funds upfront and have a monthly payment until it is paid off.
HELOC = Home Equity Line Of Credit. That is a line of credit based on the equity in your home. The limit of the credit is set by the lender. They will likely want you to maintain a certain amount of equity in your home. It is similar to a credit card, in that you only owe for the amount you actually spend. A home equity loan is a set amount that you borrow against the equity in our house and you would owe for the full amount. Its a loan.
This is my understanding of it. I'm new to investing and haven't touched the equity in my primary but I get the principles. Best of luck to you and I'll keep an eye on this thread as others chime in with more info.
BTW I just scrolled down and saw there are other posts on this topic. Scroll down and check out the links.
@Christian Friend, let's say... you "own" just 6% of your home. Sorry, no Home Equity Line/Loan for you. But well done on finding a Lender to let you borrow so heavily in the first place! But now it's time to hunker down, until you achieve a lot more equity than 6%. (Or, save enough deposit to buy another property without that new Loan also needing your primary as collateral).