HELOC Example help

[Paul C.]

New to investing and do not have tons of cash. My wife and I plan on buying a fixer upper with medium repairs needed for ourselves to live in for atleast 5 years. I want to give examples of numbers and can someone tell me how that would affect my monthly payments?

We buy property A for $100,000 with 20% down and have a $500 monthly conventional mortgage. We rehab with cash and the value of house increases to 250,000. This would mean we have $150,000 in equity of property A, right?. Would that mean that we could then use a HELOC to put a down payment using a conventional loan on property B for $150,000? Depending on our HELOC rate, would that basically increase the mortgage on our first home or would all payments stay the same?

How would this change if we used a FHA owner occupied loan? Can you get equity from property A before the owner occupied period is up?

[Jeff Bridges]

When I did a heloc, they only lent up to 75% of appraised value. It's unlikely they will lend you 100% of appraised value between the 2 loans. They will want you to continue to have skin in the game. Since you have an existing 1st loan, that gets deducted from the 75% give or take of appraised amount. I would assume that only 187.5k (75% of 250k) will be available for you to borrow, so you'll only likely get 87.5k from your HELOC. You can always call a credit union or bank you like and ask them what they would pay on your proposed loan scenario. You will definitely have a separate payment schedule for your HELOC on top of your existing loan, so expect the HELOC payments to be much higher since they tend to have shorter repayment periods. They are completely different loan payments and HELOC payments will be dependent on repayment period that bank offers and interest rate. Your loan officer would give you more definitive answers.