Posted by Jim IL on May 06, 1999 at 14:54:14:
Marla,
Not being a lender, I cannot say what factors exactly they will look at. I’m sure credit worthiness, debt to income ratio and equity in the property being used for collateral are all factors.
The debt to income ratio may be less of a factor, since the purpose of the loan is to “Consolidate” the debts and make ONE payment, that will usually be less than the multiple payments to creditors.
Not too mention the fact that the payments made on the “equity line” are tax deductible. (at least the interest portion)
I just know from my own experience that when I went to get an “equity loan” for “debt consolidation”, the lender made out checks to me and the creditor I was to payoff. I just signed them and sent them off to the various credit card companies.
The remaining amount in the loan was left untouched and I simply had to write out checks from the “Equity line” to access it. (I wish I had that money now, thanks to REI I now know “what” would be a better way to use it!!)
Thats my story and I’m stickin to it!
Jim IL
What’s Acceptable? - Posted by BR2
Posted by BR2 on May 05, 1999 at 18:05:00:
My sister has decided to partner with me on my next real estate deal. Her home is paid for and she wants to get investment money via mortgage. What is an acceptable reason to give the mortgage company. She doesn’t want to tell them it’s for real estate investing.
All suggestions appreciated.
Re: What’s Acceptable? - Posted by marla
Posted by marla on May 05, 1999 at 19:05:30:
I used “to increase reserves” when taking cash out on a recent refi of my PR. Have used “debt consolidation” in a previous life (pre RDPD).
Marla (Santa Clara, CA)
Re: This could be fraud - Posted by matt
Posted by matt on May 05, 1999 at 18:22:41:
The bank will ask what the home equity loan is for, and if you or your sister aren’t up front about using it for investment capital it could be considered fraud.
Home Equity Line of Credit - Posted by Sean
Posted by Sean on May 05, 1999 at 18:08:47:
Why not go for a home equity line of credit? Many times she can pull out just the cash she needs by writing a check off of her credit line and as you pay it back, there will be more equity there to pull from.
Re: What’s Acceptable? - Posted by Jim IL
Posted by Jim IL on May 06, 1999 at 13:05:37:
Many times, if you use, “debt consolidation” as your reason, the lender may want to see the bills your going to consolidate, and make the checks out directly to the creditor.
So, if your gonna use the funds for another reason, do not lie.
Just don’t volunteer info.
Look into “Equity lines” of credit. They are more flexible. High rates, but as they say, “availablity of funds” is what is important. Not the price of those funds.
Good luck,
Jim IL
Re: This could be fraud - Posted by Carmen
Posted by Carmen on May 05, 1999 at 22:30:12:
What happens if you tell a bank you want a personal loan for a “vacation” and then you change your plans and don’t go - is that fraud?
All the bank cares about is whether you pay them back. The clerks have to fill in all the blanks on their forms, otherwise they wouldn’t even bother asking. You could tell them just about anything - they will never check anyway (can you imagine-the bank calling up your travel agent and making sure the ticket was purchased and the hotel bed slept in???) Hahaha!
I don’t advocate outright blatant lying - but has anyone heard of the “fungibility” of money? It means that you can’t tell which dollar bill was earmarked for what purpose after all the funds are in one account.
Not on a equity line of credit! - Posted by Jim IL
Posted by Jim IL on May 05, 1999 at 18:39:09:
When I got my “equity line of credit” a few years ago, no one asked “what” it was for!
So, if they ask, tell them you plan on using it to “improve your life”, or “have some fun”.
Both are true, and neither is specific!
Once you get a line of credit like that, the only requirements I recall, were that I could not write a check for less than $500.00…hmmmmmm that was easy!
Anyway, good luck, and thank your sister, she sounds GREAT!
Those of us with family support in our REI adventure are surely blessed.
Take care,
Jim IL
Re: I doubt it - Posted by Stacy (AZ)
Posted by Stacy (AZ) on May 05, 1999 at 18:36:45:
Matt-
I know for my home equity line of credit, I didn’t have to mention a thing about what I was going to use the money for. And judging by the continual junk-mail I receive asking me to take out other equity loans, it becomes obvious that the money can be used for anything. The security is in the home, not what the money is used for.
Now, amybe the rules change for 125% loans, but I would never use one of those anyway. On the other hand, if the bank asked me what the money would be used for, I wouldn’t lie.
Stacy
Re: I agree - Posted by Stacy (AZ)
Posted by Stacy (AZ) on May 05, 1999 at 18:18:09:
Another advantage is that the payments are for interest only (in most cases), at a very acceptable rate. Also, probably tax deductable. It sure works for me.
One note of caution: Use it wisely. Always remember, this money is secured by her home. It would be best to take out only enough to get the total loans to to greater than 80% LTV, if possible.
Stacy
Re: What’s Acceptable? - Posted by marla
Posted by marla on May 06, 1999 at 14:17:09:
> Many times, if you use, “debt consolidation”
> as your reason, the lender may want to see
> the bills your going to consolidate, and make
> the checks out directly to the creditor.
Good point, Jim. Because it hadn’t happen to me, I hadn’t thought of that. Are such things as the borrower’s debt, credit rating and general finances factored into the lender’s decision about ensuring the debt consolidation?
Marla
*Who, ME wrong? 
- Posted by matt
Posted by matt on May 05, 1999 at 19:03:38:
I should of mentioned that I’ve never taken out a home equity loan. But her question was What’s a good reason to tell them she needs the loan because the sister doesn’t want them to know it’s for investment. I should of said IF the bank asks be up front. But obviously if they don’t ask you don’t have to volunteer it.
In the future I’ll restrict my comments to what I have personal experience in.
Re: Typo - Posted by Stacy (AZ)
Posted by Stacy (AZ) on May 05, 1999 at 18:20:29:
One little typo makes a big difference. I meant to type:
It would be best to take out only enough to get the total loans to NO greater than 80% LTV.