Home Equity Line of Credit on Investment

Hi,

I am a fairly new investor. My partners and I are just picking up our first rehab project. It is a duplex, and we are paying cash for it.

My question is, I talked with US bank about getting a Home Equity Line of Credit but they said that they only do that for Homesteaded properties. Are there other companies that give HELOC’s for non-homestead properties.

Or is it too risky to take it as a homesteaded property, get a HELOC and rent it out anyways.

Thanks,
Eric P.

It has been a couple of years since I shopped for HELOCs, but at the time Bank of America would give a HELOC on non-owner occupied property up to 80% CLTV or $100K whichever is less.

With the recent decline in market values and the higher default rates we are seeing these days, I don’t know if BoA is still doing this. Won’t hurt to ask.

Or is it too risky to take it as a homesteaded property, get a HELOC and rent it out anyways

FRAUD? Risky?. :rolleyes

Do you really need someone to answer that for you?

Mark,

Eric is a new investor. Yes, he really needs someone to answer the question.

Eric,

US Bank is telling you that they only make HELOC loans on owner occupied properties. I am guessing that noone in your partnership plans to occupy this property as a primary residence. In this case, applying for a loan as an owner occupant is lying on your loan application, and is loan fraud. If the lender is a federally chartered bank, then your crime is automatically a felony and a conviction could get you a free room in a federal gated community.

Did you ask the lender what loan programs your partnership would be eligible for?

Eric,

I’m almost certain that there are no more lenders doing residential investment property loans. This would be true for brokers and also the retail side of banks.

On the otherhand, you should be able to get a line of credit with local banks in your area. This would be done as a commercial/business loan. It will either take some digging around or you will need to work with someone who specializes in finding financing like this.

I don’t think you want a HELOC. As it sounds like you don’t have a mortgage on it, you could probably do a regular 70% cash out refi. There are still banks out there that will do investment properties along with the commercial departments of local banks. As someone else said, banks that did HELOC’s on investment properties either don’t exist anymore or stopped doing them (National City was one of them). Also I believe BoA also only did two units, not 3 or 4. I know of at least one credit union that still does 1-4 unit investment properties and their rate is about 5% on a 30 year due in 15. Of course it’s only 75% LTV and requires 1.5 points.

Wow, this credit union’s terms sound great! We need a no money down loan, and were prepared to pay 8 points and 15%!