Advice/Recommendations for banks to get a HELOC in Atlanta GA

[Audrey Easton]

Hello Everyone!

I bought my first house a year ago and I have been house hacking by renting the two extra bedrooms on AIRBNB. I have gotten some advice that it would be a good time to get a HELOC on the property before the market crashes. I don't quite have enough saved up yet to buy my next property comfortably but I would like to have access to re-use the large downpayment I put into this house when I buy my next property in a year or so.

I would love any advice about HELOC vs Cash Out Refi (I'm leaning towards HELOC). And how to find a good bank to do the HELOC. I don't know what questions to ask or if I'm allowed to not use the credit with out penalty. The two companies I have talked to are BofA and Figure.

Thank you so much for your help!

Audrey 

[Andrew Postell]

@Audrey Easton if you are just looking for a HELOC on your own, primary home that should be pretty easy to find. Who you have your checking/savings account should have a product for you. I would guess that if you bought your home 1 year ago that your interest rate is rock bottom....so I would absolutely NOT recommend getting a cash out loan (unless there is no other option). HELOC should be the right direction to go in to start. HOWEVER....just to provide some differences here I've put 2 pointers below for reference:

To me there's a couple of main points of difference between a HELOC and a Cash Out Mortgage:

1. HELOCs have low costs

2. Mortgages are fixed Rates

What this means is that a HELOC is NOT designed to be a permanent financing solution. Two of the common areas of concern for HELOCs I see out there is the 10 year maturity date and the adjustable rate. Since HELOCs have adjustable rates they will often catch people off guard when they adjust. Rates are increasing now...so what will they be in 5 years? it is likely that your rate will increase in the future. The 10 year maturity date is where the HELOC will modify into a different product all together. Meaning after opening the HELOC for 10 years it will cease to be a HELOC. It will "mature" into a 20 year, fixed rate mortgage that you can no longer draw on. And when is matures the rate will increase. I've seen typical numbers of 1%-2% higher than your current rate.

However, if you use it to say....buy another property. Then flip that property...thus paying back your HELOC. Then that's perfect! Because you will never get surprised by an adjusting rate or keeping a balance on it. Lines of Credit are PERFECT for people who have a plan to pay it back.

On the other hand, if you were going to use that Line of Credit for the downpayment on a property that you were looking to buy and hold for 30 years....this would be very counterproductive. The 30 year fixed rate loan would be a better fit for this purpose.

You might be able to think of some other scenarios but hopefully this concept is good enough to know the difference between the two. Thanks!