Newbie ?. Exploring HELOCs

[Jason Dunnett]

Current cash position is still a bit low. Newbie question, but continue to save or look at other options like a home equity loan or heloc to get started sooned? Plenty of equity in the primary.

[Kerry Baird]

I think that's a fine way to get started, as we've moved into fixers and improved them over time.  This increases value, while payments on the mortgage reduce the debt + time = equity.  

Small, local lenders in your community are typically the best bet, as it is often part of their charter to assist with financing with an eye to improve the local community. 

When I look for a loan, I pull my own credit. I ask, "With a credit score of ZZZ, what interest rates could you offer for a HELOC on my house."

Then have a talk about value:  some lenders will lend based upon a drive-by valuation, while other require a full appraisal, and others do a BPO (broker's price opinion).  They do not allow renovations to be underway, so no holes in walls, no loose wires, no peeling paint, a good roof must be in place, good windows, etc.

Closing costs are often minimal for HELOCs, but terms vary wildly.  They can have an interest only period of a few years, or they may charge interest from the beginning.  They can have a draw period that lasts 10 or 20 years, followed by a repayment period. 

You have to call a number of banks or credit unions and ask.  Figure out what works best for you.