Help! Think I made a big mistake!

[Jeff Bisgier]

Hi Folks. In less than 24 hours, I am closing on a house that I purchased via an online auction. The purchase price was $79.5k, all cash. I'm a total newbie to real estate investing and was in the process of learning all I could when I stumbled on this house just a few days before the auction. I happened to be going to my bank that same day, so i asked them about getting a mortgage (before I had read the fine print on the auction site that said this must be a cash sale). The bank told me that with an auction, you usually could not do a mortgage because of the time it takes and that most auctions are cash sales.

I told my banker that I was looking to rehab the property and then rent it out. I have just enough money in my savings account to cover the purchase and rehab, with a little left over for any contingencies. She told me that after 6 months, I can come in and get a home equity loan and pull my cash out and replace it into my savings account. She said the rehabbed house should appraise high enough that getting back my cash wouldn't be a problem. 

Today, out of curiosity, I went to the bank's website to look at the current home equity loan rates, and started reading the terms. There, on the second line, it states, "Equity Credit Loans are available only for 1-2 family owner-occupied properties." I immediately called the bank and spoke with her and she said, "Oh. Yes. The home equity loans we offer aren't available for rental properties." She really screwed me good. I'm mad at myself for not looking into this deeper, but I trusted her.

Any advice on what I can do to pull my money back out after the rehab? I'm literally in a state of shock over this. I can't have my life savings tied up this one house.

Thank you for any advice!!!

[William Murrell]

All hope is not lost. You can still refinance out, just not as a HELOC. You can get a heloc on your home you live in and then whenever the mood strikes, you can advance on the line. You could buy a car, buy another house, do whatever you want. And you pay it back per the terms of the line of credit. It's like a giant credit card kinda.

But when you get done with this house and you want your capital back, you can still get a refinance to get your money out. It will just be in whatever type mortgage you want like a 15 yr or 30 yr fixed or whatever you choose. There are %LTV requirements, but you will get most if not all of your money back depending on what it appraises for. There are usually seasoning requirements where they make you hold it for a fixed time before you do it, but I just had a bank waive that for one of mine because I paid cash for the house when I purchased it.

Take a deep breath!  You're going to be fine!