Using a HELOC for first property

[Stephen Daniel Pace]

Hi BP! I'm looking into getting a HELOC on my primary residence since I have significant equity mainly due to the current market. I'd like to use it as a down payment or cash purchase for my first investment property so that I don't have to use my cash savings. I've seen and heard that this is possible but want to get thoughts from others who have done this and what success or challenges they've had. Thanks in advance for your replies!

[Benjamin Aaker]

Hi Stephen,
Great question. For starters, you need to be comfortable tying your primary residence up in an investment. That entails some risk, but that's in all investing. I'm a huge fan of lines of credit because you can get one set up for little cost. Once it is set up, the money just sits there, interest-free, until you find that great investment deal to purchase. The downside is that you will have another loan to pay back and your new investment's financials need to be strong enough to cover this. Another option is that you can use the equity in your primary residence as collateral for a conventional loan on another property. You may even be able to avoid a down payment if the deal works for the bank. It's worth asking about. Good luck!