HELOC Or Cash-out Refi??
Due to my limited knowledge of the banking process, I am unsure which option is more advantageous...line of credit or a cash out refi?? I plan to do a rehab and rent it after I pull the cash out from the equity that I gained from rehabbing.
What do you plan to do with the cash gained?
If you are going to do another rehab, a HELOC might work best for you. You could use the cash gained to "pay back" your HELOC until you find the next deal.
I love my HELOC as it is extremely cheap! 3.5%
[addsig]
With a HELOC you can keep the loan small until you need the cash. Likely better then pulling out the cash and then having no where to invest it between deals.
It will depend on the rates and just how much you can get out using either of the two products.
You also might find that the qualification process is different.
John
[addsig]
I have a 6-family and a 7-family. I was told I could not get a HELOC on commercial properties.
I'm a mortgage broker and I have not found any HELOC's for commercial properties. If anybody knows of any, I would be very interested. There is a market for a product like this.As for the refi vs. HELOC, good information already put forth. HELOC is likely cheaper and more useful, but if you have a high rate on the current mortgage or have some need for longer term debt consolidation, it could make sense to do the cash out refi.
Quote:
On 2004-06-22 16:11, shamund wrote:
Due to my limited knowledge of the banking process, I am unsure which option is more advantageous...line of credit or a cash out refi?? I plan to do a rehab and rent it after I pull the cash out from the equity that I gained from rehabbing.
Every single profit that I make from my rehabs will be rolled into another rehab investment so from the way it sounds, I think the HELOC would be my best option. Good info guys.
Thanks
When I was buying my first 6-family, the mortgage broker I had was not experienced in xcommercial loans. Of course, he didn't tell me that. He took so long to do a deal, the seller threatened to put it back on the market. I had to take a high rate with 3-year prepay penalty. If there was a HELOC on commercial, I could have used it, refinancing will be expensive. I have been told I could use cross-collateralization, use the equity on this house to buy another, without refinancing.
Isn't that similar to a 1031 exchange??
A HELOC adjusts with the prime rate which is on the rise. You may also want to talk to your accountant and make sure your HELOC is tax deductable. From understanding you have to have 12 months seasoning on the property to get a HELOC, whereas, with a conventional re-finance there is no seasoning. Please call with any questions.
Jill
AMS
404-514-2512
Quote:
On 2004-06-22 16:27, 64Ford wrote:
What do you plan to do with the cash gained?
If you are going to do another rehab, a HELOC might work best for you. You could use the cash gained to "pay back" your HELOC until you find the next deal.
64Ford
But wouldn't the fact that I would have to turn right back around and pay back my HELOC hinder me from receiving my full profit everytime that I use a HELOC as oppose to a cash out refi?? Please fill me in on what it is that I am overlooking or not aware of here. :-?
I know of a bank which offers owner occupied, commercial properties with a equity business line of credit. Ltv up to 75%, they will go in 2nd position, but it has to be behind their first. Of course, being that it is a bank, they want a full doc program. Line amount max is 250k
Please send me a private email and I will tell you which bank...
Derek
Quote:
On 2004-06-22 18:49, kdxhx wrote:
I'm a mortgage broker and I have not found any HELOC's for commercial properties. If anybody knows of any, I would be very interested. There is a market for a product like this.As for the refi vs. HELOC, good information already put forth. HELOC is likely cheaper and more useful, but if you have a high rate on the current mortgage or have some need for longer term debt consolidation, it could make sense to do the cash out refi.
Based on what you've shared, I vote HELOC.
And cash out refinances DO require seasoning to loan against appraised value - rate and term or no cash out refi's usually do not.
I just closed a HELOC on an owner occ 100% that was owned less than 6 mos so it is possible. LTV for non owner occ will be considerably lower.