best way to pull money out?

[n604]

here is the situation:

the property has a first mortgage of 170k.
and a HELOC at second for 63k.

Over the years the value of the house increased bigtime, so it's got a lot of equity.  I'm working with my mortgage broker on paying off the 63k HELOC, and getting a new HELOC for 400-500k.  I wanna use this money for real estate investing, mostly for flipping.

Whats the wisest way to pull the money out?
HELOC?  Home Equity Installment Loan?  Interest only loan?  Anything else?   What would you guys do in this situation?

Thanks.

[4EEM]

No closing cost HELOC that will allow you to "lock" your draws.

IE.

500K heloc

lock inital draw of 63K at prime + spread
lock next draw of 100K? at prime + spread

There are a number of lenders that will allow at least three locks on draws.

[ShaunG]

I agree with Patrick.  I think the HELOC that has locks is the best one out there.  You can lock certain amounts at fixed rates, but then the rest of the line is still open to you.

[n604]

thanks for the tip.  i never heard of no closing cost heloc before, but i'll look into it.  how do i explain this to my mortgage broker?

so you are saying each locked section has its own rules, and own interest rates?

[Starlite_Funding]

Home Equity Line of Credit
You borrowed a Loan Agains your house against
you would have to pay the HELOC off first
Now if you want to Refinance the Home and there is enough equity in the property you can refinance by doing a cash out to pay it off.
But it has to be paid either before or during the transaction.  


Carol Wilson
Nationwide Loan Consultant
Starlite Funding

[n604]

There are a number of lenders that will allow at least three locks on draws.

how can i find these lenders?

also, is there a max ammount the companies would give me on a HELOC?  because a few companies i talked to said they can't give me more than like 200k, even though i got like 500k equity in the house.  they all wanna give me option arm loans instead, for the 500k, but i don't want that.  what i want is a heloc.  so should i go with a 200k heloc?  or should i try to find other companies (if there are any) that could give me a larger heloc ammount?
thanks.

[4EEM]

I can do no closing cost up to $500K
less than or equal to 90% prime - .250
90-95 LTV  prime + .5
95 -100 LTV prime + .750

[Mtg Master]

What I recommend our clients to do in situations like this is to do a first mortgage with an Option Arm with a calculated rate of 1% which on $500k would have a payment of $1,500 a month,
And then take that and put it in an Annuity that will earn 8+% compound (Investment Guaranteed)
And then go to the Bank and get a Equity Line using that Annuity (Leveraging)
@ Prime-1% (7-7.5%)
And then go play in the real estate market using the Banks money and you can even loan it out Hard Money on Real Estate @ 15-30% and earn the spread on the money
Not usind yours while it sit there and compounds.......
Or
You can use the Banks money to go buy and flip properties and not have to worry about having to arrange financing.......Write a check !

Just a suggestion........

[jensun09]

I have another suggestion. Heloc is a lot more expense than 1st mortgage. If you know the amount of cash out you need, then you should combine 1st and 2nd, then get the cash out you need, then open another heloc for the future use. The closing cost is very minimum.

Jennifer

[deaaak]

Mtg Master,

Where do you find annuities that compound at 8%?????

[charveyjr]

Would one have to have AAA credit for that?  Or would a 560 fico suffice?