Achieve eSignature Lawfulness for Home Loan in European Union

How to eSign a document: eSignature lawfulness for Home Loan in European Union

what's going on guys this is chandler smith and one of the bigger questions that i get asked is hey is it worth it to use a heloc and so in this video i'm first off going to explain what a heloc is i'm going to talk about the pros and cons and then i'm going to show you the situations i think you should use a heloc and the situations you most definitely should not so with all of that being said let's jump into it all right guys if you're new to the channel i've been investing in real estate for the last nine years i currently own 162 units of residential real estate and over 160 storage units that puts me just north of 25 million dollars of real estate so throughout purchasing all these properties i've had the opportunity to use a lot of different financing as a matter of fact i'm over 10 million dollars in debt right now so i have a lot of debt and that's okay because if you're using debt properly it's a good thing if you're not it can be a very bad thing and in this video i'm going to help you understand what a heloc is when you should use it and when you most definitely should not all that i ask you to do is remember to smash the like button subscribe to the channel and hit the little bell so that i can help you build a huge passive income which in order to do that you're going to need to learn how to use that properly one of those things being a heloc and now that we've covered that let's jump into it the best definition i can give you of a heloc is it is essentially like a credit card except the amount you're able to borrow in your heloc is based on how much equity they feel comfortable letting you borrow against your own home so for example let's say you bought a home for a hundred thousand dollars and you've lived in it for a while and now it's worth two hundred thousand dollars now you've paid some of it down you also had a down payment but you got a hundred thousand dollars of equity in this property and you go into the bank and you say hey i want a heloc and they say perfect we'll give you a heloc for a hundred thousand dollars on this equity that you have in your property here's how it works you only have to pay a little fee on the front end you can use it whenever you want you can put it back whenever you want but whenever you have it you're going to have to pay this interest rate and just so you know this interest rate isn't locked forever it can change as the prime rate changes and that is what a heloc is so a lot of people say hey i've got equity in my home i need money to start investing in real estate or pay off my car or to do something else you can literally use the money for whatever you want um we're going to talk about that because there are certain things you most definitely should not use the money for but a heloc gives you the ability to go and get this massive check from the bank because that's equity you have in your property now they're probably going to go and do an appraisal on your property or just do a very brief look at it to make sure you've got enough equity and then they're going to give you this chunk that you can take out and they're gonna say this is the interest rate now but again your interest rate is going to be the prime rate plus one percent or the prime rate plus two percent whatever it is so you negotiate the terms with a heloc you're going to have the interest rate that is most likely going to be changing i've never seen them lock this in for the long term so you've got a changing interest rate you also have a set term a lot of times they'll say hey you've got access to this heloc for 10 years and then we're going to reevaluate sometimes it's really short sometimes it's longer but there's a specific time where after that you're going to have to be reevaluated on whether you can continue to use that heloc or you get a new heloc or whatever option you choose so seems pretty simple right you go in you say hey i want to heat lock you pay usually it's only a couple hundred dollars to get access to this heloc and now you just pay interest on it for whatever money you borrowed and it's an interest only loan so you could keep it out for as long as you want let's say you borrow the hundred thousand dollars and you put it into something and then you're just paying the monthly interest as long as you're good with that that's a-okay just recognize that the interest rate could potentially go up the other thing that's really cool about a heloc is you can get a heloc for a hundred thousand dollars but you don't have to pay interest on it unless you've actually pulled money out of that heloc so you go in you get approved for your heloc you got a hundred thousand dollars you can pull out whatever you want but maybe you wait until you actually need it because you're going to be flipping a property or doing something else with that money there's no point in pulling it out and paying interest every month because what's cool about a heloc is you don't have to do that you can just pull it out when you need it and you can put it right back in for when you need it so i actually know a lot of people that will do like a heloc arbitrage type deal so they'll give hard money to people they're paying three percent on their heloc but they're making 12 percent and they pull it out and toss it over make that money and then they put it right back in so they're getting this return on their heloc by you know lending it out for a higher interest rate but i'm getting ahead of myself i don't want to talk about all of the ways you should or should not use a heloc i first want to talk about the pros and cons because if you understand the pros and cons then you personally are going to know what you should or should not use it for but then i'm also going to help you at the end of the video a lot of times when people are considering a heloc the other alternative is completely refinancing their property so i'm going to talk about the pros and cons of each of these with a heloc the one major pro is you can get the heloc but like i said you can pull it out you can put it back in you also have the huge advantage of it being very cheap money not necessarily your interest rate because that's going to be prime plus one so odds are if you refinance your interest rate will actually be smaller than it will be on a heloc and you don't have the risk when refinancing because you can get your rate locked for 30 years compared to this that is consistently changing but the advantage is if you don't need it you can just leave it in there so you don't have to take it out it could just sit there forever or you could take it out the second you're done with it you can put it back in it's very liquid so that you don't have to continue to pay the interest rate where if you go and refinance you pull that money out you've got a hundred thousand dollars sitting in your bank that a lot of people don't realize it but every month even though you've refinanced you're technically being charged interest on that money every single month because now it's just part of your loan now it might be a slightly lower interest rate but you can't say oh you know what i don't need this hundred thousand dollars yet let's put it back into my refinance until i need it no no it doesn't work that way so with refinance you want to make sure you've got a consistent place for that money or you're losing money where with the heloc you can take it out when you need it you can put it back when you need it and the major expense i was talking about is a heloc doesn't have a lot of upfront expenses where when you refinance it does a lot of times you're paying one and a half to two percent to refinance and that's of the amount that you're financing and so that can be pretty pricey where for heloc it's pretty inexpensive to do what's required to be able to get access to that heloc for me personally because my business has done very well i haven't used a heat lock per se because i haven't needed to back the money i borrow from the bank with a property now i do when i get loans on the properties but i actually use a line of credit they've just looked at my business and said you know what chandler we've given you a 250 000 line of credit it's not backed by anything you've just proven to us that you're a very good person to lend money to and so you can use it so that i have used and it works the same way the only difference is with a heloc if you choose to use the heloc then you're spending to do the heloc when that might limit your ability to refinance because if you refinance you can't have the heloc on the property that's all going to have to be taken into consideration so it's kind of one or the other when you're in your situation if you have access to get a line of credit because your business has proven themselves a line of credit's even better because then you can leave the equity in your property for if you want to refinance later so those are the big pros and cons to line of credit or home equity line of credit compared to refinancing your property i truly think the biggest one is you know it's going to cost less on the front end and you've got the flexibility to put that money in or pull it out as you need it the biggest disadvantage is the fact that your interest rates are changing and that you don't have a long term because 10 years from now things could be completely different but the rates are going to be changing even more consistently than that a lot of times they're only based on a month to month or every six months or every year and so that's something that can be very scary because if you're borrowing money and you're borrowing it knowing that you need to use this heloc for a two to three year period a lot can happen in a two to three year period that will make the interest rates you're paying on the heloc not worth whatever you ended up investing in and that's why you need to be very careful that you're not taking money in a heloc that might need to be locked up for the long term that you can't replace with other money because then if prime goes through the roof your interest on that is going to go through the roof and that is the biggest thing that you want to make sure you're careful about when using a heloc so now that you understand what it is i'm going to explain some of the situations you should use it and some situations that you shouldn't if someone comes to me and says chandler i need a heloc so that i can buy a property cash and then i'm going to refinance they've told me i can refinance in three months or six months or a year well look at your risk first reward is this a property that's an extremely good deal that you wouldn't be able to find anywhere else yeah well you probably want to use your heloc to get it but make sure that you can pull off the refinance because if you've taken this equity out of your home you've put it in interest rates start to go up and it's locked up in this other property you want to have the ability to refinance so you can lock in the rates and preferably you want to keep it as short as possible because if you're willing to do a heloc odds are your interest rate works there which means it should work to be able to get a loan on the property but if you have a heloc locked up in the property and then you get to the point where you wait so long that even refinancing it your numbers don't work that's also something you've got to worry about so make sure that you know your timeline anytime you're borrowing money at an interest rate where the interest rate can change or even where it can't you want to know exactly how long it's going to take you before you can pay that off now for me when i've got 30-year fixed mortgages i don't care if i take the full 30 years because the property is going up in value the cash flow is going up all of those things are good and i know that my expenses aren't changing because my interest is going up where with the heloc your interest could potentially go up so make sure you've got a time frame pegged a good example of where not to use a heloc if you're pulling out a heloc to buy an investment property and you don't know how you're going to be able to pay that back but hey i can get a hundred thousand dollars to put as a down payment on a 400 000 property that's a little sketchy because yeah your property might be cash flowing well now but if interest rates go up and you can't replace that heloc now you've purchased a property that is completely bought with interest so you've got your fixed rate which is good for the 75 percent but if you use your heloc for the 25 and you get two three years into it and you're thinking crap interest rates have gone up two three percent now i'm not cash flowing on this property now i'm even having to pay out of pocket that could be a stressful situation for you and so for me again find a place that is short-term for your heloc something that you know for sure within the next six months to a year at the most in my opinion you're going to be able to pay back and pull that out now it doesn't mean you need to pay it off maybe a year goes by interest rates haven't changed you want to leave your heloc in there you want to use your money in other places as long as you always have a short term exit strategy with your heloc so you don't end up in a place where you're toast a situation where i wouldn't use a heloc but i would go towards a refinance is if someone comes to me and says chandler i've got a hundred thousand dollars equity in my property that's enough to buy this other rental property what would you do i don't know that i'm gonna have another hundred thousand dollars coming in to replace that i'd say well look if you're planning on staying in your home for a while and those numbers work good then refinance your property you're gonna get a lower interest rate you're gonna be able to pull that money out put it in as a down payment and then get a good interest rate on the rest of it with buying the rental property that makes more sense but if someone comes and says hey you know i'm gonna do a flip it's gonna take six months or i'm gonna be able to refinance in six months or i'm gonna be able to do one of these things that's short term that's where i would say the heloc is the right pick for you all right guys that's all i've got to say about a heloc i know that's pretty straightforward pretty simple it should be it's a great tool if used properly it can burn you hard if you don't use it properly so best of luck going and pulling out a heloc or refinancing on your home or saying you know what maybe i'm going to hold off because i don't really have a place for either of them one thing i would say there's nothing wrong if you don't know what your strategy is with going in and getting approved for a heloc so you've got access to it especially if it costs you three four hundred bucks to have access to a hundred thousand dollars if you need it as reserve funds that's a great use as well that's one thing i've used my line of credit for is i haven't really needed to use it but i've got 250 000 that i know i can get at prime plus one that is just sitting there cost me 400 to get that line of credit on the front end i have access to it for the next five years that seems like a very smart thing for me because if i do get in a pickle i'll tell you this a heloc or a line of credit is a heck of a lot better than using money on your credit card and paying 24 interest every month because prime plus one i guarantee is always going to be substantially less than a credit card so it's a great option for you as an alternative to continuing to put money on your credit card now if you guys enjoyed this video remember to smash the like button subscribe to the channel and hit the little bell if you're interested in learning how to start investing in real estate go check out the other videos on my channel and if you're really interested and you want to jump in with both feet go grab my real estate investing course down in the description now if you guys enjoyed it again hit the like button we'll look forward to seeing you guys in the future videos i said guys a lot thanks guys [Music] you