HELOC or Refinance mortgage?

Question

Hello

I am having a hard time wrapping my head around the HELOC.Can I consider HELOC as an adjunct to my primary mortgage?Say the remaining loan amount is 500k and say I have about 50k built up in equity.Would it make sense to have an HELOC on a MF rental property that was bought for 750k?

Thanks

Jimmy Lieu · Answer

HELOC is basically a credit card you get to borrow on the equity you have in a property. I believe most lenders will require you to have at least 20% equity in the property to qualify for a HELOC. When you get the HELOC, you can use it like a credit card which you can purchase stuff with it and you have to pay it off.

There's two periods: draw period and repayment period. The draw period is when you can use the HELOC like a credit card and repayment period when you have to pay back everything.

You can use the HELOC with up to around 75% of the total equity in a property. So with the 500k property, you can get up to a HELOC around 375K.

I have never used a HELOC but this is what I've read and have been told.

Peter Morgan · Answer

@Jimmy Lieu

I am curious if I can use the HELOC credit card to pay off my principal or buy another property? instead of spending it in buying an expensive car.A refinance would allow me to do the same just trying to understand which  approach (refinance or HELOC) gives optimal value for a owner occupied multi-family

Peter Morgan · Answer

@Jimmy Lie

Thank you so much this was very helpful.

My down payment was 20% three years ago so am I a good candidate for HELOC?

Should I go for HELOC or Refinance (my current mortgage is 30y conv @3.5)in the current situation with historically low mortgage rates

I am also trying to better understand equity

Let's say purchase price was 750k with 20% down payment and let's assume 50k was paid off after three years  on a 30 yr mortgage loan

So the Equity is 200k?What if the property value appreciated to one million in three years, is the equity still 200k or 450k?