Enough equity on your investment property puts you in a position to get a home equity line of credit to consolidate debt or even buy a new property. A home equity line of credit can provide the most cost-effective source of cash. It is possible to get HELOC; however, strict qualifications come along with it, which may drive you to other alternative options.

HELOC qualification requirements

With HELOC, your property acts as the collateral. It lets you borrow against your investment property and access cash as needed. HELOC can be both for investment properties and primary homes. HELOC on investment properties is more complicated than a HELOC on an investment. This is because investment properties have a higher risk value than primary, and that is why lenders opt to give out to primary homes. Lenders charge higher interest on investment properties due to their high-risk value.

Primary home HELOC have a credit score of 620 or greater, while investment properties have a credit score of 720 and above, making owner homes an easier option

Search for a lender

HELOC lenders on investment properties are hard to find in the market. Now that you qualify for a HELOC investment property, you must create time to look for one.

Where to find HELOC lenders

Real estate forums; Online forums on social media platforms and websites have the best ideas on where to get investment property lenders.

Banks; some banks do offer HELOC offers. Check for eligibility with your local banks or credit unions in your area and on online websites.

Brokers; Mortgage brokers are ideal when shopping around for HELOC investment. They have a wide range of lenders who deal with property investment. Do not just settle for one option; weigh at least three to five lenders, comparing fees and rates that come along with the loan.

 You have an option to apply with multiple lenders as long as it does not affect your credit score. Working with multiple lenders allows you to compare the rates before settling with the most reliable.

Negotiate

If you do not have an obvious winner, contact the best lender of your choice and request a better offer. Telling them about other competitive lenders is a great way to land a deal.

Other HELOC Investment property alternatives

If you do not meet this investment property, there is a friendlier option you can work with worth the equity of your land and property.

Primary residence; Primary residence HELOC have better interest rates compared to investment properties due to their low-risk value. With residence property, cash reserves may not be required compared to investment property, where six months of coverage is needed on rental properties as proof for long-term tenants.

Cash-out refinance is limited to 80% to 90% of the equity in your property. They have lower rates compared to HELOCS. They function by replacing your existing mortgage with a new one for a greater amount than what you currently owe your lender. However, there is the risk of foreclosure if you cannot pay.

Unsecured personal loan; Personal loans have no collateral and completely rely on your credit score and finances. Most of them offer zero down payment with same-day loan offers. However, the interest rate is higher than HELOC.

Home loan equity; your property value is a qualification for home loan equity. You can take a loan if you have enough equity on your property. They offer some cash with fixed interest rates and installments.

Note: the HELOC interest rate can be higher if the property's value drops over time. You will end up paying more money than what you owe.