# Trying to get HELOC on income property and need advice



## mcu (Dec 6, 2009)

Hi,

I am trying to get a HELOC on an income property with my bank and they came back with a lower than expected value after an evaluation. I have a friend that's an agent and another that's an evaluator and both think the place is worth 600k min. The bank came back with 513k and because i am self employed and also had a slower year, they want to give me 65% on that value (minus my mortgage, which comes up to only 120k). After threatening to go elsewhere, they said maybe they could get 75%approved but that would be the absolute most. I have enough assets to cover it all including cash.

Should I start shopping elsewhere? Can one bank evaluate it much higher than the other? I want to avoid having to disrupt the tenants with several evaluators. The older tenants in there start panicking when they see evaluators 

The point of the HELOC is to purchase other property. Also would it be a good idea to prepay my mortgage 15% allowed annually, so in this case it would be 40k in order to get 40k more on my HELOC for lifetime?

Looking for advice and suggestions.

Thanks


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## mrcheap (Apr 4, 2009)

It never hurts to shop around (unless you're paying for the evaluators), but HELOCs on investment properties are different beasts than on primary residence (PC Financial won't give HELOCs on investment properties, period).

One alternative is to contact a mortgage broker (who, I understand, can also arrange HELOCs from multiple lenders) and see what they come back with.

With regard to pre-paying on your mortgage, unless the HELOC rate is much lower than your mortgage rate I don't see the point (just use the funds you would have used for the pre-payment for the down-payment of the new property - in fact your lender for the new property would no doubt prefer this).


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## kubatron (Jan 17, 2011)

My advice is that as a mortgage broker, it would be difficult to get you a HELOC on an investment property. Stick with your bank. 

Regarding value, ask your realtor friend to pull up comparables that show exact same houses, sold prices, within 3 months. Then show this to your lender who used an appraiser, who may have lowballed. You can also ask for a second opinion from another appraiser, at your cost, see what they say.

75% should be done, but not higher than that. Definitely not above 80%.


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## mcu (Dec 6, 2009)

thanks guys. Kubatron whats your thought on doing a lump sum payment on my mortgage in order to gain an increased value on the heloc. My mortgage rate for 5 years is 3.75% and for the HELOC, bank is giving me prime.

Also I am working on a new property i bought two months ago. This one I will live in, but my goal after renos is to get the max HELOC on it so I have the $$ available as I need it for other investments. Will I have same problem with personal residence? Will they go 80% and someone told me that banks are lowballing values to cover their butts because they are not sure if the market will crash or not...any truth to that?


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## marina628 (Dec 14, 2010)

Our last investment property required a 35% down payment as this seems to be the rule on INVESTMENT properties .Who is your bank as it sounds like a conversation i had with my bank recently lol


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## mcu (Dec 6, 2009)

It's TD...which bank were you dealing with and what did you end up doing?


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## marina628 (Dec 14, 2010)

TD as well and we put the 35% down .


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## mcu (Dec 6, 2009)

Just an update...I finally got TD to approve 75% LTV. So basically, Evaluation price x 0.75 minus any mortgage balance I have. 

I asked this before, but would like to hear more opinions. Is it worth making a 15% paydown I am allowed to do this year in order to get that 25-30k added on to my max limit on the HELOC?

Thanks again


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## balexis (Apr 4, 2009)

That other property you want to purchase with the HELOC, will it be a personal property or another rental?

What are the interest rates we are talking about (mortgage VS HELOC)? You may be able to optimize on that front (use cash to prepay higher interest mortgage to increase lower interest HELOC limit).


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## mcu (Dec 6, 2009)

Current mortgage rate is 3.79% locked in until May 1st 2015 and HELOC is at prime (which is currently 3%, but for how long no one knows)

I would use that cash to purchase other rental property, but with today's crazy market, it could take 6-12 months or more before I find a real deal.


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## marina628 (Dec 14, 2010)

If you are like us you will have the extra down payment by time you find your property.We are not comfortable with doing HELOC for down payments ,we save our money until we have the down payment then buy. We have five investment properties now and I would probably wait til fall to get serious about purchasing .BMO has 3.79% 5 year rate now , anyone find a better fixed rate ?


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