Heloc for down-payment

9 Replies

I'm looking to make my first deal and have decided on using my heloc for my down payment, is there anybody in Wisconsin or Madison area that has used this strategy? Is there any certain banks or credit unions that are better to use for this strategy? I was told some banks will not lend to you this way as you are taking a loan to pay for a loan. 

@Phillip Davis

This strategy definitely works, I've done it. I've heard that banks do not want you to use a HELOC for buying another property. The simple way around it is to tell them that you want the money available for any kind of home improvements or debt consolidation. In my experience, it was Don't Ask Don't Tell. Once you have it set up, you get a checkbook that you can use at your own discretion. Just cut yourself a check for whatever amount you want and use it as you see fit. One potential huge downside is if you are using a HELOC on your primary residence to buy an investment property that goes absolutely sideways, you'll could lose the investment and be homeless.

@phillip Davis
I’ve done this and it’s worked very well. Currently, I’m under contract and using my HELOC to fund this deal. After the renovation is complete, my bank will refi the property with a commercial loan. I then pay off the original HELOC and can do it all over again.

how would the second lender know? you are bringing cash (via wire or cashiers check) to closing for your 20% and the HELOC is secured against the other property, so who cares, unless you are doing secondary market, then they want that money "seasoned" but who buys in their personal name anyway.

Yes, I've done it several times using a HELOC on for a down payment on the next property. As long as the HELOC and your new loan don't exceed your maximum DTI ratio you're good to go. I actually just closed on a purchase today in which I used the HELOC on my home to pay cash for a flip.

My favorite banks in the Madison area are Capitol Bank, Summit Credit Union, and UW Credit Union. Send me a PM if you want some names.

I am a huge fan of this. Using a HELOC from our house has been a large portion of every property that we have bought (160+ units). It has never been a problem. We've used Badger Bank, Greenwoods State Bank, 1st National Bank and Farmer's State Bank.

It also allows you to aggressively pay off the HELOC while still having access to those funds if need be. Compare that to aggressively paying down a loan, but those funds are gone until you refinance or sell.

Are there advantages to cash out refi vs. HELOC? I am currently considering the refi. A couple reasons for this is one loan vs. two. And likely will sell my primary residence in a year or two max. Thoughts? When you all use HELOC, how much $ are you talking?

@Phillip Davis I am going through this right now myself. Try UW Credit Union or Summit Credit Union. Both of them offer HELOCS up 100% LTV. How do you plan on financing the purchase?

@Ham Merritt, I am planning on conventional mortgage with 20% down payment from my heloc 

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