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what loan should I do?

Posted on: 22nd Jan, 2007 03:28 pm
in an out of state rental property i own i want to replace the roof ,repairs etc etc. my credit is okay and i have suitable equity in the house as to the amount i estimate will be needed for the work. i am doing some homework as to the way to do this and i see a home equity line of credit or a home equity loan as a possibility. this forum seems like a good place to get some advice.
anyone have ideas what would be the best way to go?
i also am considering putting the place on the market afterwards as it really is a hassle owning a property out of state.
thanks in advance!
If going the HELOC route, how much are you planning on pulling?

Pretty much depends on how much you are willing to pull from Equity.
Posted on: 22nd Jan, 2007 05:23 pm
Hi Magnum,

Can you please tell where actually the property is located? The kind of loan available would depend where the rental property is situated.

Posted on: 22nd Jan, 2007 06:48 pm
Hi magnum,

Welcome to the forums.

Whether you'll be better off with a home equity loan or a line of credit will depend upon your personal preferences regarding a fixed rate (home equity loan) and variable rate (home equity line of credit), and your financial strength to manage either of the loans.

Considering that you may be selling the property after some time, I shall suggest that you go for a home equity line of credit. There is a predefined cash limit up to which you can withdraw. So, if you can restrict yourself to withdrawing lower amount, you'll pay less while repaying.

There are lenders who allow you to take out HELOC with no fixed terms for withdrawal and repayment of cash. You can keep making payments on the loan till you sell the property.

For more insight on this issue, you can refer a previous dicussion on Home Equity Loan vs HELOC.


Posted on: 22nd Jan, 2007 08:06 pm
Sara has offered very accurate and appropriate loan advice. One other consideration is the current condition of the rental property. Your post mentions replacing the roof. If the property is in less than good condition, a home equity loan may not be an option. On a home equity loan, the lender is going to require a full appraisal and issues affecting safety or overall condition may keep you from being approved until those items are repaired.

Most (not all) home equity lines of credit are done with Automated Valuation Models (AVM) which are electronic and don't require an in-person inspection. Now I'm not advocating you misrepresent the condition of your home as you will be asked and probably required to sign an affidavit at closing that there are no issues with the condition of the property. However, what may be a minor issue with the roof could be considered by a real estate appraiser as a bigger issue and since a HELOC doesn't require an in-person inspection, it may be your better choice.

One thing to note, home equity lines of credit (HELOC) do require a higher credit score when borrowing on an investment property.

You know, one other option is to consider putting it on the market in its current condition and trying to sell it for market value less the cost of the repairs you would have to make.

Whatever you decide...good luck.
Posted on: 22nd Jan, 2007 09:37 pm
Hi all
Thank you for all of great advice and tips about my situation, I am grateful for the help believe me and I consider myself lucky to come across this great forum. Okay let me go into a bit more detail about this. I have a good credit score and will have no problems when the time comes on a credit check. I owe less than one half of what the house/land should be appraised for. The house is located at the central Oregon coast on acreage with a stream,private gate,and a view of a river and about 10 miles from the Ocean. The house needs a roof and other cosmetics (nothing major) . My belief is that I would have a more marketable house with a new roof etc.
I actually am leaning toward a HELOC but I do want to know what to expect from a lender. I don't think I will need more than 35,000.00 --anyone?
Posted on: 23rd Jan, 2007 02:47 pm
As you describe the property it sounds terrific. When you say acreage one of the considerations to any lending is how much value is placed in just the land. Even though, I would continue to lean towards a HELOC (Home Equity Line of Credit). You will pay less fees to close on this type of loan and less issues with the condition of the property. The only caveat is that if the property is TOO unique or TOO rural that an automated (computerized) value method may not work. In that case, it will require an in-person real estate appraisal which will notice the roof issues. At that point it may be possible to have funds set aside and held at the title company to pay for the necessary repairs. You would have to find a contractor, have them give you a bid, and then supply this information to the lender.

Again, good luck.
Posted on: 23rd Jan, 2007 03:12 pm
Hi Magnum,

It's good to know that you have a favorable credit score. I find so many people bothered about their scores and struggling hard to bring it up.

Until and unless you talk to some lenders, you cannot figure out exactly what you can afford. Moreover, you need to find out how much you need. If the figure you mention is determined after an evaluation of the repair work, then that's fine. Otherwise, as Ken suggested, just talk to a contractor and find out how much you will have to spend on the repairs. Then search for a lender who will be willing to provide you with the required amount.

With best wishes

Posted on: 24th Jan, 2007 03:53 am
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