HELOC on Primary home that will be convert to RENTAL

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HELOC on Primary home that will be convert to RENTAL

Kevin Kim
Member since 2020 · 69 posts · 12 votes

Hello

I own primary home in CA , East bay and now I would like to buy another primary home and keep the current home as rental. I am not sure how soon I can get new primary home (I am trying to offer this week but will see how it goes) but in case, I would like to apply HELOC before I start new home loan process. Called one of local Meriwest Credit Union and asked if I should apply HELOC as Primary or Rental but answer was kind of Primary since it is Primary now. Then the agent says once it converted to rental near future, the loan officer can reduce the HELOC... Is it good practice to open HELOC when I received pre-approval letter form lenders for new Home purchase? I can have 20% down but want to open HELOC in case if I need some extra cash.

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  • Nicole Heasley Beitenman
    Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
    4y

    Unless you finance both the HELOC and the purchase of the new primary through the same lender, I don't see how the lender on the HELOC is going to know that you converted the property to a rental. I've never had a lender ask a single question about a mortgage that was set to autopay. As long as they're consistently receiving their payments, they shouldn't have a reason to ask questions.

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  • Kevin Kim
    OP
    Member since 2020 · 69 posts · 12 votes
    4y

    Thanks Nicole for your insight.

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  • Jared RineBusiness Member
    Lender · Sacramento, CA · Member since 2009 · 1k+ posts · 277 votes
    4y

    @Kevin Kim...the HELOC should be opened as primary, because that's what it is right now. However if you draw on the line, the payment will need to be factored into your DTI calculation for the purchase. If you need more insight, let me know.

    Jared Rine United Lending Partners53 Reviews
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  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    4y

    Same answer as Jared, above.  Today, the house is a primary.  All the future intentions are...future.  Not set in stone.  

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