Need advise on my first HELOC.

[Berry W McIntyre]

I was going to purchase my first rental property and I want to make sure I dont create a nightmare situation. These are my HELOC terms:

Assuming an appraised value of $225,000

1st mortgage set up at $180,000 80% loan to Value (LTV)

HELOC (Home Equity line of credit) set up at $33,750 15% (LTV)

Combined loan amount $213,750 (95% of the appraised value)

Interest rate 1st mortgage 3.875% 30 year fixed rate conv loan

HELOC interest only ARM: WSP + 1% (3.25% Current WSP index + 1% = 4.25%)

Principle and interest payment would be $846.43

Full monthly obligation including Home Owners insurance ($100 per month) and Taxes ($100 per month) : $1,046.43

The interest only payment on the HELOC assuming the full draw of $33,750 at 4.25% would be $122 (shown above)

Total monthly obligation between both mortgages : $1,168.43

~$25,000-26,000 – would be the cash available from the HELOC at closing

What this refinance accomplishes:

• ~$25,000+ out in cash for the real estate investment opportunities
• Escrow refund – should be a wash with what we are estimating we would be setting aside to start your escrow (~$1,200) and that is your money to do with as you please
• Creates a HELOC that you can tap into on an as need basis (during the draw period which is the first 5 years). As you pay down the principle on the HELOC, you can draw on it as needed up to the full cap (which in this case is $33,750).
• Keeps you set up with a conventional first mortgage with no Private mortgage insurance.

How does this look guys? Oh Btw, the CoC is 12.2% and $280 cash flow