will it work? questions on home equity loan/financing rentals

Financing, Hard Money Lenders, Private Money
1

Hi guys, been a few years since I last posted :slight_smile: I recently bought a rental investment property for 250k with all cash, it’s rented for $2000 a month minus $1000(tax+condo fees) for a net $1000 income.

  1. Is the approval process easier for home equity loan than a regular mortgage? Lets assume the appraisal value is 250k or higher, do the lenders care about your income/debt ratio, ask about every single line on your bank statement etc… like a regular mortgage. Or do they dont care as long as the appraisal is good and you are doing <80%.

  2. Since the rates are low, and there are many good valued properties, i want to take out a home equity loan for the max amount (80% of appraisal) on the rental, then use that money to buy a second rental. Basically leverage it up.

  3. If I have a home equity loan on a rental, i understand the interest on the home equity loan is not deductible while a mortgage is? How does that make any sense. Lets say I make $1000 net rental income, if i have a $1000 monthly mortgage interest, my $1000 rental income will not be taxed. Yet if I have a $1000 monthly equity loan interest, i will be taxed the full amount for the $1000 income. Makes no sense! is there any legal way around this?

  4. Are there any other methods/loan types to take out a loan on my rental investment to be used elsewhere.

Thanks!

2

I can speak to the approval process on a home equity loan,I refinanced my primary residence two months ago to take some cash out, to do exactly what you are talking about. I only wanted 60% of appraised value, but I had to “jump through hoops” because they were using DTI ratios and I’m self employed

So based on my experience, for a conventional loan, they do look at DTI even if you have plenty of equity,

3

hi, i dont think refinance with cash out is the same as home equity loan.

I did a refinance too on my primary residence, it’s basically just paying off your existing mortgage and get a new mortgage.

Can someone clarify thanks