Home loan question: HELOC, Second Mortgage, Cash Out Refi
January 5, 2019 2:08 PM   Subscribe

I wonder if any of the smart folks here might be able to help me out with a home equity question? Specifically banks that offer loan products including: HELOC, Second Mortgage, and Cash Out Refi's on an existing home or perhaps other lines of credit?

I live part time in San Francisco and Minneapolis and am looking to purchase a home in San Francisco, I need to pull some of the equity out of my Minneapolis home to help cover the down in San Francisco. I have secured options for a cash out refi on the Minneapolis property but would like to explore options for a HELOC or a second mortgage on the Minneapolis property to allow me to keep the great rate I currently have on property to give me access to the capital/equity on short notice if/when I need it to purchase a SF property ideally without having to go through the full cash out/refi process.

Suggestions for banks or lending institutions that might offer a HELOC on what is a second home but is classified as an investment property in the eyes of the banks I have talked to so far? Or banks that would offer a second mortgage on the substantial equity - giving me access to the cash when/if I need it?

or other line of credit options that were reasonable?
posted by specialk420 to Work & Money (7 answers total)
I've done some HELOCs with Penfed (Pentagon Federal Credit Union). It's always been fairly straightforward - you have to join, but that can be done for as little as $15 or $20 (see here). Right now their rate for a non owner occupied HELOC is prime + 1% up to 80% Loan To Value - 6.50%. They pay all the closing costs with the exception of the appraisal fee and any taxes that Minnesota charges on new debt.
posted by true at 5:08 PM on January 5 [1 favorite]

A second mortgage has no right to the property in case of uh; lets just say financial failure. Hence the higher rates due to the higher risk involved / absence of collateral.
Add in the investment property aspect; ... there will be few or no banks that will get involved for less than a double digit interest rate (once you include all the fees surcharges origination costs etc; it might not Say double digit on the note; but when the original principle lumps in an additional 15% of costs - you've got a hidden double digit interest loan).
Dangerous describes what you are contemplating doing.
/R/ there are no banks that will go near it unless you have like; $100,000 of loose investment to sign as collateral; which if you did; you would probably not be bank hunting. :(
posted by Afghan Stan at 8:06 PM on January 5

Bridge loan offerings perhaps?
posted by typecloud at 5:17 AM on January 6

Suggestions for banks or lending institutions that might offer a HELOC on what is a second home but is classified as an investment property

A HELOC is not on a second home or investment property, it's on your existing home. You don't have to give the bank an intended purpose for the HELOC. Some people have HELOCs simply to provide an emergency fund. The bank doesn't know or care, because no spending plan exists when the HELOC is set up.

I did what you're proposing when I moved a few years ago, although I didn't intend to end up with two homes. I had a preexisting HELOC on my first apartment, then later went shopping and found the new apartment, and used the HELOC to pay for part of the new apartment. Then I sold the first apartment and simultaneously paid off the HELOC. The bank was Citibank. This was in NYC.
posted by JimN2TAW at 8:07 AM on January 6

Thank you for all the good answers particularly @unmark . My financial advisor specifically wants me to compare all three options with her thus the question. Ill take a look at what I can find from the credit unions mentioned and similar.
posted by specialk420 at 4:08 PM on January 6

When I needed a HELOC years ago, the best rate/deal I found was through a credit union that was affiliated with a university I attended - you could join the credit union if you were an alum. I guess because the credit union was pretty small and focused on the university community, they were incredibly friendly and easy to deal with - I could just email them questions and stuff like that and I would get a quick personal response, for example. Lesson - always check your credit union options.

I have used PenFed for other stuff - primary mortgages and refis -- and they have always been great, although they are much bigger/high volume than a local credit union, so you can expect some more bureaucracy.
posted by Mid at 7:13 PM on January 6 [1 favorite]

@mid - awesome. thank you for the help!
posted by specialk420 at 12:23 PM on January 7

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