Has anyone ever used their primary homes equity as collateral?

[Franklin Nunez]

I haven't been able to get a heloc because I don't have 2 years of self employed tax returns. I want to use the heloc to put towards the downpayment for an investment property. Ive heard of people using their existing property as collateral. How are these 2 methods different? I have over 150k in equity is collateral an option?

[Kerry Baird]

@Franklin Nunez, ask around at all the small community banks and credit unions near the property. Each HELOC provider has different rules for their requirements, unlike with the conventional mortgage side of things.

I don't see 2 methods in your post. Do you mean HELOC vs HELOAN or second mortgage?

A HELOC is revolving, sort of like a big credit card. It will affect your Debt to Income DTI ratio as you use up the line, just like a credit card would do. This can make it difficult to get further financing. You can draw from it and repay, draw and repay for between 10 and 20 years (depending on the bank), before the HELOC turns into an amortizing product, while you start to pay it off. These can have a full appraisal, a drive by appraisal, or some other way they value the property.

A second mortgage will most likely have a full appraisal and will amortize like a mortgage does, over a set period of time. It will (most times) not have variable interest, and will not fill up your DTI to the same extent. It is more like a mortgage and less like a credit card.