HELOC on Duplex when it is a Primary Residence on a VA Loan.

[Adam Joseph Reed]

What's up BiggerPockets! First post here. I have a question for you folks.

In 2020 I bought a duplex for $300,000 with my VA loan at 100% LTV. Last year I refinanced it with the IRRRL at 2.25%. In the last few months there have been comparable sales that have closed in my county at $549,000. Assuming my home would also appraise for $549K, that would leave about $255K in equity.

I am looking to take out a HELOC so that I can create some options to buy more real estate with. I have many ideas and several paths I could go, but the first step is to open up a HELOC.

I spoke with a local bank, First Citizens Bank to open up a HELOC. The draw to them was the 89% LTV. When I spoke with them, they said they could not open up the HELOC because it is not solely a primary residence. They wouldn't loan because I receive long term and short term rental income from the property.

The second bank I spoke to was United Federal Credit Union. I had heard they did HELOCs on rental property at 80% LTV so I started the conversation with them. They also would not approve the HELOC because even though my long term tenant covers all but $25 and I received STR income when I am away from my primary home, they wouldn't open the HELOC because I live there.

These responses seemed like a Catch 22 and I am not sure how to proceed.

Which leads to my questions:

1. What Lenders might approve a HELOC on a primary residence receiving rental income?

2. If I can't find one that will do it, should I shift my focus to just buy another primary residence with the remaining VA eligibility then apply for the HELOC again?

3. Or should I refinance the duplex at a higher interest rate and pull out my equity and buy other real estate with a 20% down payment on more than one property? I think this would free up my VA loan to make another purchase, as well as a higher return on equity.

4. Or a combination of #2 and #3?

5. Just hang tight and continue to pay the mortgage?

Thank you for reading these semi complex questions. I am open to any and all feedback as I get clear on a game plan moving forward. 

Onward and Upward.