All Forum Posts by: Alec Hilliard

@Lia Martinez i did find a lender able to refinance 75% of the LTV. @Jared Bouzek was awesome and connected me with a broker out of Texas, who then found a lender.

I'm in TX too and need access to this lender! Can you PM me? :)

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My wife and I bought an investment property with hard money to flip last month.

We have fallen in love with the property and want to purchase it for ourselves as our primary residence.

Several people have said it's pretty easy to get the deed moved over to our personal name, but I'm not sure of that process.

We will have to take a loan on the property.

We have 198k in the property as a flip and it appraised for $270K.

On personal property, there is no way to use that equity to purchase, correct?

Any advice, knowledge on what to do here?

Thank you!

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@Ben Zimmerman

This totally makes sense. So it looks like the consensus is that the HELOC only makes sense if you're wanting and access to that capital. (Vs putting an extra 10k toward a mortgage and a HVAC going out and you can't ask for that money back)

Basically if you have extra money sitting around a HELOC is better than just parking it in a savings account.

Thanks for your input! 😎

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Originally posted by @David Dachtera:

Originally posted by @Richard Jumonville:

I too looked at this and saw some advantages, just depends on what your up to in your investing. I'm not doing this due to I need my cash.

There are some interest saving advantages by not holding cash in your savings or checking when you have debt which helps escalate the principal pay down.

The heloc allows you to have access cash when needed.

With this said you can use 100% of your savings and 100% of your income to put towards principal.

So with this strategy you are paying down your principle faster than a typical family for 2 reasons. Your paying extra our of your income directly to principal and you are not paying interest on loans due to your savings is covering a chunk of loan principal.

Only thing is that the heloc can be called due at any time.

I found a spread sheet and I ran the calculations both ways.

1st using 100% of heloc on primary principal of mortgage.

2nd using only 10% of heloc on primary principal of mortgage.

Both of the above came out with a similar outcome. Because you are just moving debt.

The big advantages came from, not paying interest on loans due to dead cash in savings and using 100% of your income towards principal.

Again, no one is talking about "moving debt". Make sure you understand that. If not, feel free to ask questions.

That said, of course, it *IS* possible to get a 1st Lien HELOC. Some lenders still do that. This can have some advantages. However, make sure it appears as a real estate loan on your credit report. Some lenders slip up on that - notably, BMO Harris. If it's not coded properly, it will count against your revolving credit utilization which could be a serious issue on your credit profile.

... and even a 1st Lien HELOC can be accelerated!

What banks are you seeing that are still issuing 1st lien HELOCs?

Who do it correctly?

Thank you!

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Originally posted by @Ben Zimmerman:

Originally posted by @Alec Hilliard:

@Ben Zimmerman

I'm unfortunately overly familiar with the concept of velocity banking and chunking that a lot of garbage financial YouTubers talk about. I HIGHLY suggest you do more research and I actually made a YouTube video myself stating that velocity banking as these other gurus talk about is a scam. I even threw out an open ended offer to PayPal $1000 to anyone who can prove the heloc process to work and I will extend that offer to you as well (so far nobody has). Unfortunately people suck at math and can't see through the fundamental flaws in what the speaker is talking about.

Both a HELOC and a mortgage are simple interest loans. There's no magical math going on behind the scenes.

A 200k heloc with a 10yr interest only draw and 20yr repayment system at 4.5% interest is roughly 750/month for the first 10 years, and 1583/month for the remaining 20 years. This means that you pay nearly 470k in total payments. https://online.citi.com/US/JRS...

Contrast this to a 200k mortgage at 3%, and you will pay 843/month and a total payment of 303k over the 30 year loan. https://www.mortgagecalculator...

The heloc ends up costing you 167k MORE in interest. There is no repayment scenario where a high revolving balance at a higher interest rate is beneficial as opposed to a lower interest rate mortgage.

Both a heloc and a mortgage are both simple interest, a heloc is simple interest calculated daily, and a mortgage is simple interest calculated

HELOC daily interest is: daily interest = balance * rate / 365

Mortgage interest is: monthly interest = balance * rate / 12

Since the overwhelming majority of the money on a 200k heloc will not be repaid within that first month, or the first year, and instead continue to have their balances revolve from month to month for decades, the calculations come out the same. A month is 30 days, or 1 month....Likewise a year is 365 days or 12 months, no matter how you look at it they are the same time interval. So both equations then become: yearly interest = balance * rate. At the end of the day 4.5 > 3, that's just how math works. As long as the balance is not being immediately repaid in very short time intervals, and instead is allowed to revolve from month to month, then there is effectively no difference in the calculations.

I HIGHLY suggest you further research this topic before going to talk to more lenders.

How do you explain what these "all in one" loan companies are selling then?

I don't see how dumping in your paycheck, your "mortgage amount" and everything you make and then paying bills out of it, wouldn't in turn lower your daily balance, (which would lower your interest) making more of your money go towards the principle, = paying it off quicker?

Vs. with a reg. mortgage, if you pay extra, stop paying, the same interest and principle is due the following month.

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@Ben Zimmerman

I get what you’re saying. 🙂 There are some banks that will automatically use the funds to pay off the mortgage so that they are never in a second lien position. Several of my friends have done this. And mortgages are amortize over 30 years so for the first 10 years you’re mainly paying interest only with no additional payments going towards principle.

Versus a line of credit is the daily balance. So you can pay it off quicker if you pay The same amount as you would with a mortgage and pay all of your bills through the line of credit.

Like someone mentioned above, the “all in one loan”

You use the line like a checking account.

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@Ben Zimmerman let’s say the house is worth $280,000 and you get a line of credit for 200,000. You then take that line of credit and pay off the existing mortgage and so the line of credit becomes first lien. Which then allows you to pay off your house much quicker because lines of credit use simple interest.

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@Ben Zimmerman exactly. There are some banks that will provide enough line of credit to pay off the existing mortgage and enter into a first lien position. That is what I’m trying to find.

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@Kerry Baird - Bank of Texas said they can't do 1st lien HELOCs unless the house is paid off. And they can only do personal homesteads....not investments.

Maybe I'm not asking the right questions?

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What if you have 25% equity in the property? @Balaji A.

Most credit lines just work off your LTV?

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All Forum Posts by: Alec Hilliard

Alec Hilliard has started 8 posts and replied 46 times.

Post: Can I personally purchase a house from my LLC

Post: How To Personally Buy a Property From My LLC?

Post: 1st Lien HELOC On Investment Properties?

Post: Does Velocity Banking work????

Post: 1st Lien HELOC On Investment Properties?

Post: 1st Lien HELOC On Investment Properties?

Post: 1st Lien HELOC On Investment Properties?

Post: 1st Lien HELOC On Investment Properties?

Post: 1st Lien HELOC On Investment Properties?

Post: 1st Lien HELOC On Investment Properties?