Kind of like a 2nd mortgage, but treated like a credit card. HELOCs were coming up on credit reports as "revolving" or "unsecured credit". I have heard that this is being changed, since the house is the collateral, but have yet to see any change on my credit report. This means that right now they can hurt your score a little bit if you are not careful. IE:high utilization), but they are a great way to buy houses "no money down" in the real world (not Guru-Land).
I bought my first investment property using my HELOC. The part I didn't realize until closing, (although the broker said we had discussed this) was that I was paying 2 points for a non-owner-occupied loan. Now, I'm looking for other sources of money. I haven't looked at my own credit report, but know it is outstanding. I didn't realize that this HELOC can affect it more, so I'll check this. Thanks for your feedback.
If you paid 2 points for a non-owner occupied loan (NOO), then you did NOT use your HELOC to buy the property. If you had used your HELOC, you would have simply wrote a check (or had the bank write the check) for the amount of the sales price plus in closing fees. There would not have been a loan on the investment property.
Also, paying 2 points for a NOO is not bad, especially going thru a mrtg broker. Most lenders require a min or 1 point, and the broker tacked on a point for their services. Not bad at all. In fact, if this is all you were charged, you can bet money that your credit is excellent. As long as you are comfortable borrowing the funds, I'd stick with your broker.
If you can, arrange your HELOC through a credit union; they usually charge lower fees. I was happy to have one available when I found some great deals at a recent tax sale and had to come up with cash quickly. I have my HELOC set up as "interest only" for repayment, and the payment comes automatically from my checking account..
HELOC=Home Equity Line of Credit.
Kind of like a 2nd mortgage, but treated like a credit card. HELOCs were coming up on credit reports as "revolving" or "unsecured credit". I have heard that this is being changed, since the house is the collateral, but have yet to see any change on my credit report. This means that right now they can hurt your score a little bit if you are not careful. IE:high utilization), but they are a great way to buy houses "no money down" in the real world (not Guru-Land).
JohnCl
Duh...Thank you so much.
I bought my first investment property using my HELOC. The part I didn't realize until closing, (although the broker said we had discussed this) was that I was paying 2 points for a non-owner-occupied loan. Now, I'm looking for other sources of money. I haven't looked at my own credit report, but know it is outstanding. I didn't realize that this HELOC can affect it more, so I'll check this. Thanks for your feedback.
michport,
If you paid 2 points for a non-owner occupied loan (NOO), then you did NOT use your HELOC to buy the property. If you had used your HELOC, you would have simply wrote a check (or had the bank write the check) for the amount of the sales price plus in closing fees. There would not have been a loan on the investment property.
Also, paying 2 points for a NOO is not bad, especially going thru a mrtg broker. Most lenders require a min or 1 point, and the broker tacked on a point for their services. Not bad at all. In fact, if this is all you were charged, you can bet money that your credit is excellent. As long as you are comfortable borrowing the funds, I'd stick with your broker.
Roger
If you can, arrange your HELOC through a credit union; they usually charge lower fees. I was happy to have one available when I found some great deals at a recent tax sale and had to come up with cash quickly. I have my HELOC set up as "interest only" for repayment, and the payment comes automatically from my checking account..