HELOC Closed! $94,000! It was quite an adventure!

[Jake Recz]

Hello. This is probably not as much of a success story as I often see here but... To me, this is big. 

We bough the property at the end of 2015. All cash. $54k with closing costs. Owner occupied. We renovated it big time with leftover cash, some personal loans, and 0% APR credit cards. No contractors, at all. It was a REO and it required work, a lot of work. I can run electrical and plumbing in my sleep now. We are probably in for around $80k-$85k total with the purchase cost. The house is now worth close to $180,000. Now we are working at paying off all that debt and I have to say it hasn't been smooth sailing all the way because things come up but it's going good. Long hours at work, chipping away at that debt. We are closer to the end than ever.

A few months ago (over two months, exactly) we decided to get a HELOC. TRY getting a HELOC. I was pretty positive we would not get approved although our credit is very good. Some leftover debt is still there from the renovation and I change jobs quite often. Very often actually. Whoever pays more! I even changed industries recently, but came back to the original industry I was in. After reading about how difficult it is to get a HELOC nowadays, we decided to try it anyway. Nothing to lose. I was expecting it to get denied and the bank to laugh in my face. The process took OVER two months with TD BANK. I DO NOT recommend them. Just don't do it. Go to your local credit union instead. TD BANK has a tendency to take their time and go back and forth with their customers with the littlest things. Multiple departments, they appear to be overloaded with applications. Two weeks for verbal employment verification, seriously? Right before closing they pointed out that the loan number has to be added to the insurance policy or we can't close. Like if that could not be handled earlier... I sure learned a whole lot about the process.

We wanted to get a $140,000 from them but they could only approve $95,000. No surprise here. They did a drive by appraisal, compared the property to local REOs that were not even similar to our house, and missed the ball by about $70k. It's ok. I'm happy with what we got. I just don't know who wanted this closing to take place more, me or them. When I realized how much they wanted this line to close I was quite surprised. The property is free and clear. No mortgage. They got first position. I got a 10 year HELOC at 5.74% variable with a 20 year repayment. Not the BEST rate but definitely good enough for our purpose of buying out of state and refinancing within 6 to 8 months or sooner if possible, with he ultimate goal of holding the properties. As you may have guessed, I will be doing most of the work myself, out of state. It's a crazy idea, but so was buying this house in the first place. We also have the option to lock into three loans at (I believe) 1.99% within that $95,000 without any additional paperwork. Quite secure, in my opinion. If the market starts to tank I guess I will just max out the HELOC, hold the proceeds, and pay the interest to have the funds liquid in my account. The interest payment is somewhere below $400 a month. Wait, can I even play game like that? I sure hope I can... Buy when everybody else is selling!

So, my point here is. Do not get a HELOC with TD BANK unless you have all the time in the world to hang on the phone with them and send additional/ corrected paperwork every day. On the other hand, if you have a free and clear property, you might wanna give them a shot. Chances are they will approve it, even if your tax returns show low income for the past few years, and you change jobs twice a year with some unemployment benefits in-between and a single maxed out credit card on your credit report and a few additional personal loans.

Now the goal is to become debt free and build up some more cash reserves before even thinking about investing into the next property. We probably could pull it off at this moment, but I sleep better at night knowing that I have no debt, before I jump into more debt, even if its good debt, such as a mortgage.

If anybody has any questions about the HELOC process feel free to ask. I'm still fresh, and my head is still spinning from all the paperwork. I will do my best to answer to the best of my abilities.