Bank Recommendations for HELOC on Rental Property?

Question

Hi All,

Does anyone have a recommendation for a good lender who will do a HELOC loan on a rental property, when the rental property has a mortgage with another lender? I'm looking to see what I would be eligible to borrow from a rental of mine to put towards the purchase of a rehab project. Thanks in advance for any advice or recommendations.

Priscilla Z. · Answer

@Tim Porsche Hey Tim, I was told TD and Wells Fargo...I had a friend in my area go check both out since she was looking for a HELOC on her rental and she said their rates are pretty good.

Hope that helps! :)

Daria B. · Answer

Hi Tim,

Is Regions Bank in the area you want to do business?

I got mine from them a year ago and was originally getting it on a rental in Maryland but they don't have a presence in MD, which is what stopped me from using that rental. But they will HELOC on an investment property. I spoke at great length with someone at a branch in my area who understood the investor in me. :-) She was very patient with me through the whole process. If you want her contact let me know.

-Daria

Nancy Bachety · Answer

Today Aliant Credit Union quoted me a HELOC for 4% fixed with an interest only option for 7 years then balloon payment or 180 months prin + interest.

Bethpage Federal Credit Union quoted me either 2.99% up to 75% LTV or 3.75% up to 90% LTV. This one is a variable month to month. Hasn't moved much in 8 years because it's .25 above the prime rate.

Teachers Federal Credit Union quoted me (last week) intro rate of 1.99% for 24 months up to 75%. I pay appraisal fee only. They pay closing costs but if I don't have a minimum ($5 K I think for 3 years) they'll charge me back the closing costs.

No broker I called handles HELOC's. You need to call around and compare what you want in a HELOC. ie draw period, fees, variable rate, etc.

Bottom line is to identify how you want it to work and shop.

Chris K. · Answer

@Steve Babiak brings up many good points.

1. I actually glossed over the fact that @Tim Porsche wants a HELOC. So yes, it really depends on the goal of what you want.

2. The additional collateral can come into play at regional banks depending on your relationship with them and what the collateral is (e.g. blanket lien over your business assets, etc). But Steve is correct that it doesn't really come into factor in most cases.

3. Steve's last point is important to understand. Many folks do not realize how "front loaded" mortgages are.

Steve Babiak · Answer

There are pros and cons as to whether to just have a single loan, or to have a first and a second that is an equity LOC. Some of the pros for having two loans as described would be that there is no added payment due unless a draw upon the LOC is made, and that the payment on the LOC might be smaller (and thus better for cash flow) since it is typically interest only during the draw period.

I disagree with the need for additional collateral - the property will have sufficient equity to allow for the equity LOC, or the loan won't happen. I guess there could be such a thing as a blanket equity LOC, and that would be where the notion of additional collateral would come into consideration. But the OP did not mention having multiple rentals, so no point to talking about a blanket.

Notice I termed this as an equity LOC rather than as HELOC, as the lenders only do HELOC on owner occupied residences - so equity LOC is the lender term for a LOC on a rental.

I would suggest to the OP that he do a search for some of my other posts where I show how to calculate the maximum amount of LOC based on the CLTV and property value. Some people think that because they have paid on a 30 year mortgage for a few years that they now have lots of paid in equity, and will be disappointed to discover there is less of a maximum draw amount available than they had hoped for.

Joe Testa · Answer

I had a HELOC with Wells for 10 years.  Since then we'd bought a new house and started renting the old  The HELOC expired and we had to apply for a new one.  Well Fargo dragged it out for months, kept asking for more documents, asking for documents we'd already provided weeks earlier, never admitting that we'd already provided the docs, the whole thing was very aggravating and fishy in retrospect.  At the end they told us we'd need 6 months of reserves on both our primaries on both our homes.   Which is ludicrous considering we have great credit, good jobs, steady rental income, and the only reason we want this HELOC is as back up liquidity.  I'm ready to close all my accounts with Wells Fargo, F Them.

Nancy Bachety · Answer

@Eddie T. To my knowledge, does not matter what state property is in. I did not ask about llc vs personal. I did not specify primary  or invest property  but banker might  have sssumed primary though we never discussed that.

Bank Recommendations for HELOC on Rental Property?

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