Need Advice - Trouble Pulling Out Equity

[Ali Radhi]

BP Community,

Hope you're all doing well. I'm currently having some financing challenges and figured this would be the best place to ask for advice / opinions. Here's the scenario: My father is currently retired and owns two homes: his primary residence (worth around $300k with a $80k mortgage) and a secondary residence (worth around $225k free and clear).

Thus far, we've approached conventional lenders and a credit union and they've been reluctant to give us a HELOC on his primary residence, which we were planning to use for a down payment on a multifamily property. While his credit score is near 800, his DTI is 55% due to retirement. Therefore, we're sitting on a pile of equity that seems very difficult to access.

The one option we've been offered is a cash-out refi on his current property. He'd be required to payoff all outstanding debts, which would leave us around $60k to invest (not to mention raise his current interest rate by close to 2%). If this option provided access to more funds, I wouldn't think twice. However, access to $60k doesn't move the needle that much.

Does anyone have other recommendations regarding how to use a retiree's current or secondary home as collateral to secure a loan? Or, can anyone recommend any specific credit unions / local banks in the Houston area that would go higher than 50% DTI on a HELOC? I'm open to any other advice you may have as well.

Thank you very much for your time,

Ali Radhi

[Cody L.]

Uck, your question reminds me of when I first started back about 10 years ago.  Just after 2008.  You could be sitting on a free and clear $1m property and couldn't get a bank to loan you enough against it to buy a sandwich.  Meanwhile deals were all over the place but no one could buy them unless you were in a position to be all cash.

Why not refinance the free and clear one? I assume there is a renter in there? If not, put one in there. The income should justify the loan on a DCR basis. Re: the main home. Banks are still F'ing idiots when it comes to underwriting so rather than HELOC, look at the refi. I know $60 doesn't tickle your banana basket, but the $60k on top of what you might get from the second just might get you what you need.

But dude, in this market it's not about how much cash you have. It's about the deal. If you round up $220k and find a $2m property that needs $400k to close, you'll be able to get the other $180k pretty easily. Go to some REI club, there are people throwing money at anyone who can get them a return.