Being Offered a Heloc but with an extra request

[Ludwig Taveras]

I’m currently working with a lender on a HELOC, but the way they’re structuring it raised some questions for me. The lender says that once I’m approved, they will disburse the entire HELOC amount (in this case $100K) directly into my account. Since I only plan to use around $40K, they told me I should pay back the remaining $60K right away and just leave the account open for at least six months so they can get their commission.

This feels a little unusual to me. My understanding was that with a true HELOC, you only draw the amount you need, and you only pay interest on the outstanding balance. Has anyone else heard of a lender requiring a full disbursement upfront like this? Is this a standard practice, or should I be concerned?

I do like the numbers I’ve been offered, but this part feels off, so I’d really appreciate any advice or experiences others could share

[Zachary Clevenger]

Quote from @Ludwig Taveras:

Good afternoon, I'm currently working with a lender that is offering me a HELOC loan, but he's telling me that once I get approved, they will disburse the entire amount of the Heloc to one of my account and that I should pay back the amount that I won't use (Heloc limit is 100k he wants to deposit everything on my account and then is I only need 40k I'm being told to pay 60k back and not close the account for six months for them to get paid their commission is this a standard practice ?just asking since I'm new on this and I'm really liking the numbers I'm being offered, but this raised some concerns because it it looks kind a weird practice so I antes to get someone's advise.

 I disagree with this recommended "practice". You do what is best for you.
Also, that is not a HELOC but a HEL (home equity loan). HEL does exactly what he is telling you, dumps the entire lump sum into your account. There are pros and cons to these just like HELOCs.
With a HEL it is typically a fixed rate, which is a good thing. You get the entire lump sum, but then you pay for that entire lump sum. No flexibility.
A HELOC offers more flexibility but comes at a cost. Its flexible in the sense you pull out what you need when you need it. So, you need $40k, pull out $40K. Need more? Pull out more... BUT... the interest rates are typically higher AND adjustable. That is the downside.

I personally use HELOCs, have for over a decade. I prefer the flexibility and can accept the added/variable APR.

If you've got anymore questions please feel free to reach out!