Advice - Line of Credit on a STR

[Ryan Jacques]

Hello BP Family, I recently opened my first STR property, which is owned free and clear. I'd like to use the equity to invest in additional properties and received the below loan terms from my local credit union. I'm struggling to determine if it is worth shopping around for another loan type such as a DSCR cash out refi or if these terms are going to be better than looking at the DSCR or other routes. Any guidance is much appreciated

Loan Terms: Line of Credit up to 80% value (~$100,000); 12 month draw period with variable rate set to at Prime rate (currently 8.5%) and interest only payments required. After 12 month draw, converted to fixed (prime rate at that time) based on 20 amortization schedule with a 5 year loan term. No Pre payment penalty. Bank will revisit terms after 5 year term if rates are better. Estimate closing costs of $2,500.  

My Scenario:  Credit Score 690-710.  I will pay off the loan within 2-3 years because I will need to sell the property in that time period to avoid cap gains taxes. I don't know the next property(ies) yet so the flexibility of the line of credit is very important.  

[Caroline Gerardo]

Most HELOC lenders will not close if you don't have a first mortgage as they use the title policy. $2500 is exorbitant fees for a HELOC. Max cap is 22 or 23%? Generally you need 720 FICO and full documentation to qualify. I think you are missing some details. A HELOC can be closed at any time, especially painful if you are not using the balance.