Creative Real Estate Investing Financing — Home Equity Loans/Line of Credit

Is your credit not at 700+? Read on.

Home Equity Loan -> mortgage products wherein all funds are disbursed at the beginning of the loan, with a definitive term and equal monthly payments

• E.G: $50,000 home equity loan for 15 years at 3.75%, would be $726 a month
• Home equity line of credit
• Not disbursed at the start of the loan
• Rather, it is available to you throughout the line, in the same way, that credit from a credit card is available to you
• Equity = the difference between what you currently owe on the home and the fair market value of that home. It’s what put into the total fair market value that is yours if a refinance gets approved

Example:

• purchase price = 800k
• mortgage owed = 300k
• equity = 800k — 300k = 500k

LTV -> or Loan-to-Value Ratio = Loan Amount / Fair Market Value

• Lenders do not go over a 75% to 80% LTV nowadays

Second, is the BRRR strategy -> get a home equity line of credit to fund the initial downpayment and as well as the rehab/renovation, then re-appraise and refinance the property for a greater purchase price, and use that money to repeat the process. This…