Is it possible to convert my HEL(Home equity loan) to HELOC on my investment property?

Asked by Aj, Herndon, VA Tue Dec 29, 2009

I took a 10 yr fixed Home equity loan (HEL) on my primary residence about 4 years back. We moved out of that property after a year of taking out the HEL. It is a rental property now. I would like to convert the HEL to HELOC because that will help me qualify for buying more investment properties. Are there any banks/credit unions in VA that do HELOC for investment property or is it possible to convert the HEL to HELOC? I approcahed the bank where I have HEL. They dont want to do it since it is investment property.

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Tue Dec 29, 2009
Andy is right although I think he misunderstood that your primary is now an investment property. That said, in order to "refinance" the HEL into a HELOC, you'll have to do just that, refinance the second loan. It will be based on the value of the home vs what you owe, so value will have a lot to do with how much you can borrow. Four years ago, we did HEL to 100%. As an investment property, you are limited to 75% of the value of the home. Even if you claim it a primary residence, the maximum is 85% FHA and 80% Conventional. There are however credit unions and small banks that may exceed that limit because they keep their own loans and make their own rules. In other words, they may not sell your loan to Fannie or Freddie or HUD. Also, if your first mortgage rate is higher than today's rates, you may want to look into refinancing the first and getting a HELOC as well. I'm not licensed in VA yet. Ask a Realtor to hook you up with a lender.
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Andy Krumholz, Agent, Reston, VA
Tue Dec 29, 2009
Hi Aj,

This question is best asked of your lender, but the answer is likely to be no. When they gave you the Home Equity loan, they did an appraisal to make sure your home's value justified their lending additional monies on it. There is an underwriting process they go through to approve each loan, so they would not transfer a loan from property to another.

You may be able to borrow money on your investment property if value will support it, and then pay off your Home Equity loan on your residence.

Good luck,
Andy Krumholz, GRI, ABR, CDPE
Keller Williams Realty
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