HELOC ADVICE FOR SECOND PROPERTY

[Matt Medina]

Hello BP Community,

I purchased my first property 10 months ago in Temecula, CA. Since then, my home has gained approx 100-125k in equity. 

I am now in a situation where I need to find a creative way to come up with a down payment for my second property. I won't be able to do a cash out refi since I only put down 5% on the home, and a refi would only get me to 20%. Yes, I could get rid of my PMI this way, but I plan on making this property a rental in the future and my PMI is only $80 a month. The refi interest rate would increase my payment more than $80 so it does not make sense to use my equity to get rid of my PMI. So another option I have been exploring is using a HELOC on the equity to use as a down payment.

My questions are:

Any advice on using a HELOC?

Also, Does anyone know any Credit unions in the Southern California Area that are known for giving good rates on a HELOC?

appreciate the advice in advance. 

[Tim Delaney]

@Matt Medina just one word of caution in addition to potentially hurting your DTI as someone else mentioned, every time I pull large chunks out of my HELOC (even less than 30% of the limit) my credit score takes a pretty big dip - as much as 20 points. I have great credit so it's not a big deal, but I do find it annoying. And if you are a bit lower to start then that dip could have a substantial impact if you are trying to BRRRR.