All Forum Posts by: Justin Phillips

@Alec Johnson I'm also a big proponent of HELOCs. That was you don't lock yourself down to 30 years of higher interest-first payments on day one. You have the flexibility of retaining access to that equity, and paying down that balance with idle funds. It's also helpful for DTI, with the interest only payment.

My wife and I have a very specialized 1st position Heloc that’s tied to a zero balance sweep checking account. It allows us to park every idle deposit on our balance, where it saves us a nice chunk of interest. Being designed from the ground up to sit in 1st position, it holds the staying power more similar to that of a traditional mortgage. That ensures we’ll have access to that equity when we need it…when the credit market tightens up.

Congrats on taking the 1st big step! I always recommend being extra strict on your investment guidelines when leveraging yoyr primary’s equity.

@Gloria C. The flexibility means you can do all of the above. I know clients that use theirs for downpayments, and clients that buy properties in cash using their line and snowball through the debt quickly. 
My wife and I are stock piling cash in ours. It allows us to not have the opportunity cost of the trapped equity. In the meantime, our cash is sitting on our balance and saving us a great deal of interest. When the market turns and deals are more plentiful, we'll start writing checks. 
The main thing with using your primary is that you'll want to ensure it's a "can't miss" deal, and that you have ample reserves should something unexpected happen. 

To your point, in nicer areas buyers usually remodel regardless of inside condition. I've seen people have full 6 month remodels on nice $1M+ homes. That being the case, anything that you can do that wouldn't be too custom and they'd need to do anyway would help. I think the lowest hanging fruit would be the popcorn ceilings. 
Bring the perception from the house needing a "Full-Gut Job" to "Update". 

@Mark Frattini Helocs are less about interest rate and more about interest cost, as well as flexibility. When you're just paying simple interest based on your balance and can park idle funds on that balance, much different equation. 
The real thing you'll want to think about with typical helocs is their staying power. When the credit market tightens, they're usually among the first things to be frozen or converted to amoritized loans. I'm a big proponent of very specialized 1st position Heloc that has the staying power more similar to that of a traditional mortgage. That way you have the benefit of long term access to equity, without locking yourself into 30 years of higher interest-first payments on day 1. 

It's not a tax, FHFA raised the fees significantly on 2nd home loans. Here's a article that details the change, 

FHFA hikes fees for high-balance and second-home loans - HousingWire

From my understanding, they're trying to combat folks buying 2nd homes and using them for Airbnb. Definitely hurts the true vacation home buyers. In some cases, it may make sense to get an investment loan instead. 

Helocs are easier on DTI because it's just an interest only cost based off your outstanding balance. That's the nice thing, you're not tying yourself down to the extra payments or debt on day 1 like you would with a cashout Refi.
My wife and I have a very specialized 1st position Heloc on our property, and it's been a great tool for us. 

Asset depletion is more used to lower DTI. It takes reserves (Retirement/Savings) and divides them over 120 months, then counts that monthly amount as extra income. Typically for folks with plenty of reserves, but enough income showing on taxes.

Helocs are great because you get access to your equity day 1, but don't have to pay for it until you use it. Incredible tool for real estate investments and otherwise. 

I'd be in for an online game! I've always wanted to try it, but I have a hard enough time convincing my wife to play monopoly with me! haha 
Consider me interested. 

I love Hawaii and would love to have an investment out there. However, I've come to the conclusion that it's smarter to buy a cashflowing property wherever you can find it, and use some of that cashflow to go on a nice trip. 
Mixing business and pleasure usually just ends up in less of both. Find a solid investment, then enjoy the fruits of your labor!