Looking for a rental HELOC

[Jim Miller]

Are there any banks offering a HELOC on rental units? We have a single-family long-term rental in Port Charlotte that we'd like to keep the current mortgage rate, but we do have some equity we'd like to have access to.

[Jaron Walling]

@Jim Miller Lenders tightened requirements and limited products since rates went up. Getting a HELOC on investment an property is hard to find. If you can find one it's pretty expensive.

The best option right now is a cash-out refinance, but if you're sitting on a low rate it may be counterintuitive. 

[Jim Miller]

I understand that, and yes, I would prefer to protect my current rate, but that may not be an option. Thanks for the insight.

[Brandon Croucier]

I have the product available but it's not worth it in my opinion.. Rates on investment heloc's are anywhere from 12-15% right now. Your most likely better off doing a cash out refinance.

[Jim Miller]

@Brandon Croucier, thank you. That would be a little higher than I would care to pay. 

[Wyatt Wolff]

They're definitely expensive... you just have to look and assess what you are using it for, and if you can get returns that will make the rate worth it. 

In general,I think C/O is the way to go though. 

[Zach Bosson]

@Jim Miller We offer HELOCs on investment properties, they are rare. The highest rate we offer is 13%, I don't know how you'd do a 15% rate, those coupons aren't selling in the secondary market.

It's not a one size fits all whether a HELOC or Cash Out is better. If you have a $500,000 2.5% 1st mgt and want $50k you'd be insane to choose Cashout over HELOC. Inversely if you have a $100,000 5% 1st mortgage and want $250,000 you should go with a cashout mgt.

Be careful, *some* lenders will discourage HELOCs b/c they make less $ on them or only offer them to get people's foot in the door.

Quick Example Scenario. 

$250,000 1st mgt at 4% $1200/mn

$100,000 HELOC at 10% - 12% $830 -$1000/mn

or

$350,000 $7.5% - $2,450/mn

[Stacy Raskin]

There are investment property HELOCs. There are investors who like that they can do multiple draws and some features which are specific to HELOCs compared to a cash out refinance. HELOC rates will be higher than a cash out refinance. These are also income based loan so the debt to income (DTI) ratio has to work.

More details:

There are lenders that do values determined by AVM (automated valuation model), not a full appraisal. They can do HELOCs down to 640 for primary homes and 680 for investment properties, combined loan to value (CLTV) are up to 85% for cash out for primary homes and up to 70% for investment properties (max CLTV depends on credit score).

HELOC maximum line amounts up to $400,000 for primary homes and $250,000 for investment properties (maximum loan to value (LTV) varies based on credit score). Only available on one unit properties such as single family residences, condos, planned unit development (PUD) and townhouses.

There are fixed 5-30 year fully amortized loan terms with 2-5 year draw periods. Full draw required at closing. Subsequent draws can be any amount above $500. Additional draw limit is 100% of total line of credit.

Up to 50% debt to income (DTI). Income can be from earnings or asset depletion. Spousal income can be considered in community property / homestead states. Income verified online through borrower's source of choice such as bank statements, asset accounts, paystubs and IRS tax filing. Properties must have been bought at least 90 days ago.

U.S. citizens or permanent residents. Property must vest as individuals or a revocable trust. LLCs not allowed.

Happy to discuss further. 

[Erik Estrada]

They are still available, however as many posters commented, they are more expensive. You can also obtain a DSCR second mortgage if you have trouble qualifying for a HELOC.