All Forum Posts by: Zach Bosson

Rich, don't feel bad a 1st lien HELOC to accelerate paying off the home is very difficult to understand, and I sometimes struggle to explain it well - some people use that to try and spin a falsehood that it's a better solution than a traditional mortgage - I disagree.

Do you have a mortgage now? If so I recommend looking at taking a home equity line of credit or closed end second mortgage to consolidate your higher interest debt to save money and provide relief for your family.

No mortgage now? Consider a cashout refinance to accomplish the same.

Compare the payments and interest to your current debt to see how much/if you're saving!

Please feel free to apply on our website(link below) one of my loan officers will take care of you!

Hi Richard,

If you have $50k in consumer debt, it’s worth looking at consolidating it at a lower rate using your home equity.

I don't usually recommend the 1st lien HELOC (sometimes called the "Australian Mortgage"). It sounds good in theory, but the math doesn't hold up.

The idea: Convert your mortgage into a 1st lien HELOC. When your paychecks hit, they reduce your balance and save interest. You spend from the HELOC as usual, and any unspent funds at month's end reduce your balance - but can be drawn back if needed.

Most people:

• Monthly deposits: $10,000

• Monthly expenses: $10,000

• Average daily balance reduction: $5,000

Say for instance a HELOC at 7%, that saves just $29/month. But since HELOCs are typically 1–2% higher than mortgages, you could be paying $167–$333 more per month on a $200k balance - erasing any savings.

For select cases:
If you want to aggressively pay down your mortgage but want access to those extra payments in case of emergency:

• Monthly deposits: $10,000

• Monthly expenses: $5,000

You’d reduce your balance by $5,000 each month while keeping flexibility. This can work, but only if:

1. 1. You actually have $5k left over each month—where’s it going now?

2. 2. If you aren’t already prepaying your mortgage, why not?

3. 3. If the concern is needing access in an emergency, are you liquid enough to do this at all?

4. 4. Is this benefit worth the 1%-2% higher rate and giving up your low 1st mortgage rate?
   

We do offer the product, and I never rule anything out without reviewing a client’s full situation—but it’s a rare “unicorn” case where this strategy makes sense.

If you have $50k I debt I'd recommend just consolidating THAT with a HELOC, reducing the interest. AND you can do the Australian mortgage with just this portion, once it's at $0, redraw it to $50k, and pay it into your 1st mortgage(so you can retain that low rate), rinse and repeat until it's paid off. I've coined this, the New Zealand mortgage :)

I’m looking for a brief letter verifying the ownership percentage of a client who files a Schedule C business in order to meet an underwriting requirement for a recently closed loan.

The client self-prepares their taxes, and because our loan type didn’t require tax returns and disallow their submission as proof, we require a CPA or tax preparer to review and confirm ownership percentage.

Thank you,

Adalberto! A few things.
1. If you're buying a new primary in many cases you can simple buy again with an FHA loan allowing you to retain the low rate on your current, you'd have to have a qualifying event which is usually manageable.

2. If your credit is strong enough, and if you're considering cashing out your current primary into a conventional it'd have to be, then you could just buy the next home with a conventional loan avoiding the need to refinance(assuming you have the cash for a down payment)

Is your your goal to use an FHA loan is to be able to put 3.5% down instead of 5% down?

1. If you're taking cash out of the home, getting to 5% shouldn't be an issue, so you could buy the next home conventional.

2. If the 1.5% is causing a stretch, I might recommend waiting until you have enough saved before cashing out your current home, increasing it's payment, and adding a new home in the mix!

Finally, a HELOC/HELOAN is an option, we specialize in those. Giving you access to your equity on your current home while retaining your low rate allowing you to buy the next place, and potentially have a little extra for the new expenses that might come up owning 2 homes. You'd want to make sure you understand if the property cashflows, would the rents be larger than the 2 mortgage payments? If not are you comfortable at a breakeven/loss to scale?

@Patrick Shep

Hey there! Good question - your purpose of funds shouldn't limit the amount of cash they lend you! The value of your home and their loan to value ratios are going to be the determinate factor there.

The only potential concern with your stated purpose is that there could be new debts introduced to the application in the form of future "real estate" aquistions that may raise more questions. We'd have no problem with that explanation and ask no further questions - but that's my best guess!

Perhaps you could reword it to "future investment opportunties" which would both be truthful but less specific to avoid concerns - I wouldn't suggest missrepping on your app!

@Marissa Gallant

Hi there, I wouldn't assume that a cashout refinance is a better option! 60% of homeowners have a 1st mortgage rate under 4%, refinancing that loses an asset (your low rate). That doesn't mean a HELOC is automatically a better option, you should look into both!

We offer both HELOCs on investment properties(rare) and Cash Out refinances feel free to reach out if you'd like to learn about your options!

Hi there!

We offer the following on investment properties.

- HELOCs

- Traditional 2nd Mortgages

- DSCR 2nd Mortgages

I've helped a ton of BiggerPocket investors already who have been disappointed by what else they've seen out there! Feel free to connect directly.

Hi Lily,

I founded First Access Lending to provide Access in scenarios just like this!

We offer HELOCs and second liens on investment properties, financing up to 80% of the property’s value. Additionally, we can run an automated instant valuation to save you both time and money on appraisals.

Please let me know if you’re interested in getting a quote!

Angel,

The 2nd lien programs I offer all allow for AVMs(automated valuation model), they provide a value instantly and you'll know how much you can borrow instantly without having to pay $500 for an appraisal just to maybe get nothing.

Zach

Hey Angel,

The terminology can definitely get squirrely. Jackson nailed the answer to your first question.
A HELOC is a line of credit using real estate as collateral.

A credit card is a line using your credit as collateral (nothing).

A business line of credit uses your business as collateral.

A "PAL" or pledged asset line is a line of credit that uses your investments as collateral.
Etc.

All of them share in common that they are a line of credit; you draw what you need and only pay interest on what you use.

Traditionally, lines of credit that have collateral are going to have much lower interest rates than those that don't, like credit cards, because in the event of default there is nothing to seize. That's why the average credit card rate is in the 20s. But as a short-term solution, playing the 0% credit card game can be an option, but from my experience, juggling from one to the next with no backup plan often ends in paying high interest in the long run. Credit card companies are for profit; they're offering 0% for a reason, after all!

Which option is best will be individual to you. Happy to chat options—feel free to connect.