Is this a good HELOC rate and terms?

[David DeRiso]

Hi BP!

(First post BTW)

I am looking to buy my first investment property. I am currently shopping around HELOCS in order to fund this. I own my primary residence free and clear and have found a HELOC that seems good.

$190 appraisal fee

80% LTV

Rate is prime no margin

5 year draw w interest only payments then balloon payment due (or renegotiation)

No other fees

I'm hoping to BRRRR multi family properties in St. Louis so hopefully I will be able to refinance properties to traditional mortgages and not get bit in the butt by the balloon.

Just want to make sure this is a good way to go.

Thanks!

[Patrick Haug]

David, My recommendation to you - Do not look at the financial numbers as the HELOC market is national, so all the banks will compete against themselves to win your business.

My suggestion is to research what banks in Saint Louis are involved in financing/re-financing renovations or refinancing active rental properties.  If you are not a subscriber to the Saint Louis Business Journal, go to the local library and review the various categories and/or the 'Book of lists' published by the Journal.  It is a good place to start.  The Journal publishes various lists for different types of banks, sizes, and activity in the area.  Post review, identify what bank leads in the lending style in which your investment activity will lead.  

Use this opportunity to begin a relationship with that mortgage broker or mortgage banker associated with that bank.  If you become successful in your investing activity, a healthy relationship with a lending institution which operates within your sphere of activity is crucial for future growth.  Plant those seeds now so that they will be ready to harvest when you will need them.