Cash or Finance and HELOC - Posted by Ted

Posted by John Corey on September 29, 2006 at 10:33:56:

How do you avoid interest if you have a HELOC?

In both cases you are financing the property and you will have interest to pay.

Getting a HELOC on an investment property is different from getting it on your primary residence. Mostly a difference in the LTV and the interest rate you will pay.

Ask around to see what is on offer. Then you will have some facts to deal with as to what you will be paying if you move forward.

John Corey

Cash or Finance and HELOC - Posted by Ted

Posted by Ted on September 28, 2006 at 13:40:47:

I think I know the answer to this, but I’ll ask anyway. My partner and I (whom I trust very much)found a property we’d like to purchase at 55K. It’s a corner lot in a neighborhood with a run down home on it. We haven’t decided if we are going to fix up the house or just demo it and sell the land (zoned for 2 lots).

My question is, should we put down a down payment and finance the lot OR take out a HELOC on both our houses (and a third house in my partners name) and just pay cash for everything - including if we decide to fix up the place?

Cash seems like the easiest, safest way because we avoid going through financing, banks, interest, etc. But we’d have the HELOC to pay off.

The second part to that question is, how does the HELOC work? What determines how much money I can get? Between three houses, I’m not too concerned about coming up with the 55K + expenses.

So, HELOC to purchase property or finance through bank?

Property is 55K - 130 x 130 with a small house and a trailer, zone R-2, and FSBO.
Bought my house for 220,000 a year ago, owe 165,000 today.
Live in Tampa Bay area, FL.

Re: Cash or Finance and HELOC - Posted by Kurt Schultz

Posted by Kurt Schultz on September 29, 2006 at 16:36:27:

Once you figure out your plan, I could give you some better advice about what tools to use for the job.

If you are going to demolish or renovate, you’re probably better off with a Construction-to-Permanent (“C2P”) loan. If you have cash, use the minimum you need for the job, finance the rest and place the spare cash into secure investments that pay more than your mortgage rate.

I wouldn’t use a HELOC against my house, that risks my home against an uncertain venture. Be a real bad show if your rehab project went bust for some reason and they foreclosed you out of your home.

Don’t let this descision stop you from acting!