Help figuring numbers for a HELOC or cash out only SFH rental

[Stuart M.]

Your goals and story: We bought a SFH in FL we rent out. We want to keep renting it out. Renovations were expensive. We are always looking to reduce our costs (interest) while maintaining flexibility if possible. This is the only SFH we own (we rent a cheaper place ourselves.)

Type of property: Single family home.

Location of property: Boca Raton FL.

Purpose of financing: We have a first mortgage and small HELOC. We want to refinance the HELOC (to include a personal loan.)

Type of financing sought: HELOC with outside chance of cash-out refinance instead.

Current or prior ownership of real estate: This is only property we own, we rent where we live. We've owned it for 5 years now.

Occupancy: Yearly leases with great tenants who generally prepay large amounts. We have rented it out for 2.5 years now but have collected all 3 years of rent already.

Value of property at present and/or your offer price: $720k XOME appraisal

After repair value: $same

Anticipated or actual appraisal issues: no, received XOME appraisal above

Current rents per month: $4.2k

Fair market rents per month: closer to 5k but current agreement runs through 1.5 years from now

Down payment or equity: owe 341k + 53k = 394k.

Income Source: W2 income with small base and large comission.

Gross YEARLY income (optional): $150k-200k (130-180k commission 20k base) in years where there isn't covid or not having a child, for 9 years now. Covid (2020) brought it down to 75k for that year because closed for half the year. We had 2 years where we had kids and lost 25% of income cause we chose to take off 3 months unpaid and could afford to (2019 and 2015.)

Monthly debt obligations appearing on credit report, plus (if applicable) personal rent and alimony/child support/etc: $2.5k rent not on CR, $2.8k mort on CR (this property), $.8k HELOC on CR (this property), $1.6k personal loan on CR, $1.3k other on CR.

FICO: Excellent.

Credit issues: None.

Additional details: The problem is the rest of the renovations are in a personal loan so I have high DTI - I think! What I can't figure out, is how is my rental income being counted by lenders and how is the mortgage being counted by lenders when they are running numbers for HELOCS or cash out refis? Are they adding my rental income to my personal income and then adding the mortgage amount to my debt payments, and my total income has to be twice my debt payments? Are they adding the difference between the rent and the mortgage to my monthly income if its positive or debt payments if negative? How are they figuring in my current HELOC? How are the dealing with depreciation on my tax return? Are they using some other formula? Are they just using a percentage of the rent or something? The process is so opaque I don't know what numbers they expect. I applied to Penfed and they just flat out rejected me but won't tell me anything. (The second level of processors changed the income on my app to something dumb like 2k per month instead of the 200k I made this year - so, basically base salary, and discounted all commission - and won't return calls, emails, or tell me who their supervisor is.)

I would prefer the HELOC due to the ability to only pay interest when you are using the funds as opposed to a cash out refi and then having all that money sit in a bank while we are paying back interest (plus the higher costs make it less likely to pencil out given the low HELOC rates.) But if a HELOC is impossible I'll take the latter cause i'm paying 8% in a personal loan right now for the rest of the renovations. But at 80% on the property i should be able to get something like 180k HELOC out of it, pay off the old HELOC of 53k and 80k in PL, and have room left over. I mean, I collect 200k in W2 income and 51k in rent, you'd think they'd figure it out somehow, but i guess "not simple" is not something people want to deal with right now. But I want that 8% down to ~4% where it should be. The other HELOC is from SCCU but the minimum payment per month is absurd, and it would be ~2.8k on 180k if I got a larger HELOC, that doesn't help at all (it would be more than my personal loan and current HELOC combined.) A Penfed HELOC should be under 1k/mo but again, rejected.

We have like 20 months reserves available (401k etc.)