Financing Advice - HELOC or Life Insurance Policy

[Matthew Schellberg]

Hi All,

I am looking for second property (house hack) and wanted advice on financing options.  

I have ~$160k in equity for my out of state property with a great interest rate of (2.8%). I have ~$20k in cash to dedicate to this deal. I also have access to a life insurance policy where I can borrow ~$30k at 5% interest. The types of properties I am looking for will need some rehab but mostly comestic (painting, flooring, etc.). I was leaning toward the life insurance policy for additional financing, but didn't know much about HELOC (questions below). Any advice would be greatly appreciated.

(1) - Does the HELOC have to be with a bank in the area near the property?

(2) - What are good questions to asks lenders when talking about HELOCs?

(3) - Downsides of a HELOC?

(4) - Would HELOC be worth it in my situation? Thinking I would need $20-30k additional to cover down payment/closing/rehab.

Thanks!

[Denver McClure]

Hey @Matthew Schellberg, speak with your life insurance agent or the policy provider to determine if you are nearing a point of 0% interest policy loans. It's common on a few different policy types, and a feature I look for when clients desire to use life policies to fund real estate. 

I suggest calling several local credit unions for HELOCs, and also looking into the national providers to find the best rate for you. Just be transparent with them when you outline your goals and use of funds. If you have a taxable investment portfolio, then I strongly recommend looking into using a Margin Loan against it first, before you go with a HELOC. Rates currently start at 5.67%-6.33% which is much better than any HELOC on the market.