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Converting HELOC into home equ. loan or other

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Money Talk > Real Estate

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edsly42
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Converting HELOC into home equ. loan or other  Reply with quote  

Crazy market here but here are the numbers:

Bought a primary residence in '13 for 249K

Appraised in spring '16 for 355K

Took out a HELOC in summer of '16 and used 55K for a downpayment on a rental property that was 255K in fall of '16. Conventional mortgage for remaining 200K

Fixed/cleaned it up a bit, now on to 2nd set of tenants. Now cash flowing ~220/month from rental property.

I'm happy with how it's all gone but don't like the looming HELOC increase, especially with rising rates. Am thinking about options to pay down the HELOC and replace with a more conventional P+I loan. Any suggestions? I think there's a chance the rental would appraise for just high enough to get an equity loan against that and still maintain 20% equity (~319K) but don't know if that sort of thing is allowed so soon after purchase (just over a year now). Any thoughts? I know this isn't the typical way to get into the rental market but we took the leap and so far, so good. Thanks.
Post Mon Nov 13, 2017 9:16 pm
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oldguy
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quote:
Any thoughts? I know this isn't the typical way to get into the rental market


That's how I did it, each time one of my houses built up equity, I borrowed against it and used the money to make a down payment on another house.

Your primary residence provides the lowest cost capital - and your non-owner occupied house mortgages will cost slightly more. So keep your home fully mortgaged (always use a 30 year fixed rate loan - no designer loans - IO, Var rate, 15 yr, balloons, reverse amortization, etc). No HELOCs or other shortterm loans, they can back you into making poor decisions at inopportune times)

You have $610k worth of RE and maybe $450k of loans. I would refi the home for the max amount - pay off the Heloc, and hold the extra capital in reserve for investing (another house or in a SP500 Fund).
Post Mon Nov 13, 2017 11:25 pm
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edsly42
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Thanks for the response oldguy. When you say you'd refi "the home", do you mean the rental? Or my primary?
Post Mon Nov 20, 2017 8:18 pm
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oldguy
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the primary
Post Mon Nov 20, 2017 11:23 pm
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