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can i take out a HELOC on an investment property in NC?

my gmaw is gifting me her house (which she no longer lives in) it is possible to take out a HELOC on that property if we may rent it out
  • June 22 2011 - Charlotte
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Answers (5)

Whether you can take a HELOC on the property or cashout in the form of a fixed loan on an investment property depends on the value of the property and the current level of indebtedness on the property? If she's gifting you the property is sounds like she owns it free and clear. 

What is the reason for taking out a HELOC?  Do you just want to have a line of credit for emergency purposes? Is it to pay off debt or are you using the funds to purchase another home?  What would be your goal and time frame for paying it off? Depending on your answers it may make sense to have just a regular fixed mortgages.

Some banks will allow a HELOC on investment properties. I know are guideline is 60% LTV.
  • July 01 2011
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I'm just going to give my personal opinion on this... As a real estate agent, I tell my clients to NEVER EVER borrow money against their home unless there is absolutely no other alternative and it's a matter of life or death.

According to The Wall Street Journal, nearly 40% of homeowners that took out a second mortgage are now underwater.  A home, be it a primary or a rental, is first and foremost an investment.  You can't save money in your savings account if you keep making withdrawals, and the same goes with your equity.  Only, on a house it's worse, because your house value can go down and then you owe more than it's worth.  

Rent it out and pocket the difference.  Or even better, rent it out and put the difference towards the principle.  Pay the house off, and then pocket the rent payment for the rest of your days.  You've been given a great opportunity... make the best of it.  And good luck!  
 
  • June 22 2011
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Profile picture for Sharon Lewis
That's up to you, you could be paying 4.5 one day and the next 6....would that bother you?Can you afford that kind of jump. I would think that in a rental situation you want everything as stable as possible so you know your numbers each month.
I would think  you would prefer to lock it in for 15, 30 years? Its a personal choice. I would talk with a mortgage broker, local, (don't post personal financial info here, ok?)
  • June 22 2011
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Profile picture for blindmolly
so would a HEL be better?
  • June 22 2011
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Profile picture for Sharon Lewis

HELOCS are adjustable rate mtgs (ARMS) but are riskier than standard ARMS. Changes in the mkt impact them faster than a high speed train. If the prime rate changes June 30, the HELOC rate will change July 1!!! 
Talk to a mortgage broker before you go this route.


  • June 22 2011
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