Hi, Ed: No, we did not pay any charge whatsoever: this was what they (Wachovia bank, and another local bank from which we got another mortgage) called a “drive-by” mortgage. I assume that they did an very fast desk-top analysis based on similar property in our area. Frankly, I felt some remorse after I posted my comment, especially since it was a response to a new investor (I guess). The equity line on investment properties is really a great tool, but if misused it can lead to disaster. Although I believe that the prime is not going to rise quickly in the near future, I would strongly caution any beginning investor to use an equity line carefully. We have used the equity line for cash purchases of real estate for a quick closing (in situations where we could save a considerable amount off asking price) and for an emergency repair or an improvement. We do not use the equity lines frivolously, and we work hard to pay them down. Gary
Just sitting here on a Saturday morning, thinking about things. Has anyone here ever gotten an equity line on an investment property? How about if they are owned in a trust? Does that matter if I’m willing to sign the loan anyway? I’ve done equity LOANS on investment props myself, but was wondering about equity LINES. Any info appreciated.
Just did one on a rental property I own. I was able to get 80% of the equity – however, I have a special situation going for me. Typically, banks will only lend around 65% of the equity. It’s interest only. The lines typically (at least mine) does not mature for 20-years. I think a fee of $50/year is incurred. No restrictions on how I use the line. Obviously, the were named as a loss payee on the hazard insurance and, of course, will record a second lien position on the property.
If it is owned in a trust, I can envision this creating a problem from the bank’s perspective. I’m not saying it can’t be done, but I would not spring it on a bank you’ve never done any business with before and who does not know you.
Yes, we have several equity lines on our properties. The best thing is that they are no-cost (no closing costs, no points, no lawyer fees, etc.). Also, since they are based on prime, the interest is low (for now!). We have to take them in our name, however, since the bank will not loan to a LLC (quit claim deed may be necessary for you). Often there is a small fee for the yearly use ($50-75/year), and our bank will not offer more than four loans (i.e., on four different properties). Of course, these must be used carefully–. Gary