Re: Line of credit ??? - Posted by ECB
Posted by ECB on July 20, 2003 at 14:00:59:
I have a home equity line of credit (“HELOC”) against my personal residence. It is largely used to fund the closing costs or a modest downpayment. It is paid off annually with my bonus from my “real job.” Using the HELOC is how I bought my first rental.
As I was able to generate substantial equity in the first rental, I went back to the bank and put in place a line of credit against the rental property.
That provides me with two sources of funding — my HELOC and the line of credit against the rental property as well.
As an aside, I could have just as easily left the equity in the rental alone and used it to collateralize a loan for an additional purchase (i.e., grant the seller of the second home a 2nd on the rental). I just like having the liquidity available.
Finally, I would advise against ever borrowing more than 50% of the amount available on the line – it tends to depress your credit score. However, should the right situation come along, obviously you would want to take full advantage of your additional liquidity.
Hope that helps.