Question:

Using HELOC for down on new home?

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I recently got approved for a HELOC for some home improvements, But out of the blue I ended up finding a home I would like to buy.

Is it possible (or wise) to use the HELOC as a down payment, and try for a mortgage to fund the rest.

I own this home outright, and still haven't closed on the HELOC, (that's happening this up coming Friday). I would probably rent out this home with the option to buy, thereby covering most, if not all of the mortgage.

Any help would be greatly appreciated.

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3 ANSWERS


  1. If you got a HELOC you're lucky.  Most banks are trying to do away with them now or limit them to 75% loan to value on property.

    This depends on the term of your HELOC.  Since you said it was for upgrades, how is the bank dispersing the funds to you?

    If they gave you a 'credit card' or checks for the funds then you can deposit that into your account and use the money for a down payment on another property.

    I stress to check the terms because it depends on what you signed with the bank and how funds will be dispersed.


  2. All of us have been tempted to do this and the banks have encouraged it.  It is the perfect source for a down payment on the new house.  The only question is whether you have to sign a paper that you are keeping this house as your personal residence.  Sometimes that is a condition for the HELOC.  If you weren't going to stay there, it is more risky for the bank.  That is a problem because it is a crime to lie to a federally insured lender.  Don't lie even if you are told "Nobody checks".  The governor of Arizona was arrested for lying on a loan application in the 1980's.

  3. You are going to have trouble getting the other mortgage.   They will not like the fact that the money for the down is a loan and that loan is secured by a different piece of property.

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