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Updated over 4 years ago on . Most recent reply
Question about using the equity in my house to buy a multifamily
Hi! My primary home is worth about $2M and paid off. I would like to draw $1-1.5M from it to buy a multifamily property with a 1st lien HELOC. The problem is that my income doesn't support a loan of that size and I was told by a loan officer I spoke to that I can use the HELOC to buy an investment property but not a business. Not sure if a commercial property counts as a business but I'm guessing it does.
My question is- are there any other ways to tap into this equity? With my income, I only qualify for a $400K line. My credit is 750+ and I don't want to partner with anyone.
Thank you!
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#2 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
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#2 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
@Sara Simpson, there are a few items that seem to not add up. Typically, the underwriting on a HELOC will be more conservative than a mortgage, so you might be able to qualify for more out of a traditional mortgage than a HELOC. Depending on your needs, it might make sense to talk to the loan officer about a low LTV first mortgage (60% or below) and then a HELOC to bring you up to 80%. I mention this only because if you are not thinking things will come up for another 1-2 years, taking out a mortgage will have fixed monthly payments that you will need to cover until you find an investment property.
Secondly, I have never heard of a HELOC having restrictions on what you can use the money for, but this doesn't mean my experience is all encompassing. I have used my HELOC to buy several flips, but I have issued wires straight to title companies and drawn down the whole line in one check to myself. No calls from any compliance officers asking how it was going to be used.
It is common use for investors to use HELOCs as down payments for investment properties. If you plan to use the HELOC as a cash purchase, you will probably not have any issues. You could get questions from underwriting if you are combining your HELOC as the equity with a loan on the investment property. An underwriter might view that as a 100% financed property and flag it.