All Forum Posts by: Ryan Anderson

I've posted a couple of times over the past month or so asking for advice on HELOC lenders and leveraging HELOCS for investing. I've been in the application process to get a HELOC on my primary residence that I plan to use on my first rental property, and am really struggling right now to make my final decision between 2 lenders. I'd love to get thoughts from the BP community.

My primary goal has been to find the highest credit limit that will give me the most buying power for potential deals, but the terms and cost have to make sense.

Here are the choices I am down do:

Lender 1: Can get me a credit limit of $219,000. Interest would be Prime + 2.5%. However, they charge around $4,300 in total fees (origination fees and closing costs).

Lender 2: Can get me a credit limit of $185,000. Interest would be Prime + 1%. No closing fees or origination fees.

I'm not as concerned about the interest rate, since my hope is to primarily use the HELOC as a short term tool. I love the idea of having an extra $34,000 at my disposal with Lender 1, but paying over $4k in Lender fees feels outrageous to me for a HELOC. These guys do offer a "Refi for life" promotion that will remove lending fees for any future refinance you do through them as a way to keep your business with their company, but I'm not sure how much I should value that since there's no guarantee that I will choose to stick with them for a future refi if they aren't offering rates that make sense at that time.

The lack of any fees for Lender 2 is nice, and I'm still getting a decently high line of credit. It also doesn't hurt that the interest rate is a good bit better even though that's not my biggest concern.

I keep going back and forth. I've been approved by both lenders, and had a bad taste with Lender 1 since the loan officer seemed to indicate that most of the closing costs would come off (or significantly decrease) after underwriting, but that's not what happened (I understood him to say that if we didn't end up doing a full appraisal a lot of those fees would come down, etc.). I've spoken with close to 20 lenders at this point, and none of them charge close to $4k to open a secondary HELOC, so that just sounds nuts to me. At the same time, I'm concerned that we may be entering a period of time where loans may get harder to come by, so having an extra $34,000 on my HELOC credit limit over the next 10 years could prove extremely valuable. Would having that extra $34,000 in credit limit make me more deals and more money over 10 years than the $4,300 it would cost me to open the account?

Anyway, I'm probably way over thinking this, but I'd love some advice from the experts here. I need to make my final decision in the next few days, and am really struggling with this decision.

Thanks again for all of your amazing wisdom!

I'm in the middle of applying right now. The one that I'm leaning toward is a 95% LTV line of credit for $219,000, with an interest rate of PRIME + 2.5%.

What do you mean by "a wide open gate?"

Hi everyone! 

I've been in the process of applying for a HELOC on my primary residence for real estate investment purposes, and have appreciated the insight and wisdom from this community regarding searching for a HELOC.

I wanted to get some further insight into how people recommend leveraging their HELOCS for their real estate investment business. 

For example, do most investors recommend using the HELOC only when you can purchase a property outright, so you can then get a primary mortgage and pay down the HELOC quickly, and then rinse/repeat? Is it ever advisable to use the HELOC to make a down payment on a property that you are getting a mortgage on? In the latter scenario, it seems riskier because you are then essentially paying down the HELOC each month from the rental income, and with a variable rate on the HELOC your cash flow won't be very predictable and can seemingly evaporate quickly. Just curious how different investors like to approach using their HELOCS.

Thanks so much again for your help as I begin my real estate investment journey here. 

Hi Bigger Pockets Community,

I've started the application process to open a HELOC on my primary residence with a couple of financial institutions to see what I can qualify for, and I'd love to get a little feedback from the experts on this community. Several of you have offered some great advice on what to prioritize on HELOCS, and I've been looking for a lender that can provide the maximum line of credit with an interest only payment option, but I'm curious how much I should care about the margin on my HELOC interest rate if I'm planning on using the HELOC as a short term tool to purchase properties and then pay back the HELOC once I'm able to refinance the property with a primary mortgage. Should I care too much about the margin if I'm getting a larger line of credit?

For example, one lender has pre-qualified me for their 90% LTV interest-only HELOC, which would provide me with a line of credit of $185,000 with a rate of PRIME + 1%.

A second lender has told me they would be able to go up to 95% LTV, with a line of credit of $219,000. But the interest rate here would be PRIME + 2.5%.

Would you opt for the higher credit line and the higher margins if the plan is to use the HELOC as a shorter term tool and not to carry balances for long periods of time?

Would love your thoughts and advice on this! Hoping to make my final decision today. 

Hi Matt, 

You mentioned that the biggest consideration for you is the maximum amount of credit possible. I currently have the option of getting a 90% LTV interest only line of credit from one lender that would equal out to a limit of $185,000, with an interest rate of Prime + 1%. Another lender will go up to 95% LTV (interest only) with a credit limit of $219,000 with an interest rate of Prime + 2.5%. Everything else between the two HELOC options is equal. In this instance would you opt for the higher credit limit? I'm trying to decide if I would ever use the full $219,000, and if it's worth having that much higher of a margin for $34,000 in additional credit. I suppose having the max amount of credit possible allows me more flexibility, but was just curious to hear your perspective (and anyone else's perspective as well!).

Thanks for sharing your insight and experience with me as I start my REI journey!

Hi everyone, 

I'm trying to make a final decision on a HELOC lender in the next day or so here. A local credit union has an option to go up to 100% LTV (up to a $400,000 limit), but hey require you to pay 1% of the balance of the account (principal and interest) at the end of each month. They have a 10 year draw period and a 10 year repayment period, so they require people to pay principal to keep the balance from ballooning at the end of the 10 year draw period.

For those with experience leveraging their HELOCs to buy investment properties, would you ever consider a HELOC that wasn't interest only during the draw period? Seems like there would be seasons when interest only payments might be helpful as you are building cash flow. I'm trying to find a lender with the best terms that can provide me with the maximum credit limit, but am not sure if it's smart to go with a lender that doesn't offer an interest only option. 

Thanks, everyone!

Ryan

One more question for you all. I just got off the phone with a local credit union that offers up to 100% LTV on a primary mortgage, capped at $400,000. This is super appealing, however they do NOT offer an interest-only option. They require you to pay 1% of the balance of the account (principal and interest) at the end of each month. They have a 10 year draw period and a 10 year repayment period, so they require people to pay principal to keep the balance from ballooning at the end of the 10 year draw period.

Do you all feel that having an interest-only account is critical? Would you ever consider getting a HELOC that was NOT an interest-only account? Does it matter to you if you are using it as a short-term tool?

Thanks again for your help!

 Thanks Malcomb! Have you found lenders that will tell you they CAN'T call a note due whenever they want? I was under the impression this was a universal thing and that all lenders had had this in their terms. 

Likewise, have you found lenders who have said they won't freeze your line of credit due to economic conditions?

Thank you, Dawn! I'd love to get your thoughts on the question I posed to Matt. Are you mostly looking at how high your LTV is through a specific lender? Are you trying to find a lender who can get you as close to 100% LTV as possible? How are you able to figure out how different lenders will appraise your property without going through the full application process?

Also, do you find that there are advantages to working with one lender for all of your HELOCs when possible (primary residence HELOC as well as rental property HELOCs)?

Thank you so much again for your great insight!

 Hi Matt, 

This is really great. Thanks so much for your insight on this! 

One question for you: How are you able to find out who can provide the maximum amount of credit without actually going through the full application process? I'm finding that most of these lenders will only order an appraisal once you actually apply. This makes it very difficult to shop around to find who can get me the maximum amount of credit, since that's largely based on the value of my property. KeyBank, for example, always orders a full appraisal if you decide to get a HELOC through them (no desktop appraisals). But that means I won't be able to know what my HELOC credit limit would be through KeyBank until after they've already ordered and paid for an appraisal, which kind of locks me in to using them. If I don't like the appraisal that comes back, I can't just back out without paying them to cover the cost of the appraisal.

Bank of America is the only institution that was able to quickly tell me over the phone what their desktop appraisal is without requiring me to to through the full application process. Everyone else seems to require that I apply before they do any type of appraisal. How do I compare credit limits accurately without knowing how a specific lender will appraise my property?