Using HELOC as cash reserves

4 Replies

Does anyone know if it is generally acceptable to a lending bank to use my (primary residence) HELOC as proof of cash reserves when applying for a rental property buy and hold conventional loan? Or do you need to show proof that you have X months amount of cash in an actual bank account?

This post addresses HELOCs & reserves but isn't exactly on point:


A lender most likely wouldn't allow for a HELOC to be used as proof of cash reserves. To an underwriter, that means that your monthly liability would need to increase in order to cover "unexpected" expenses. Since your liability would increase, in their eyes, you would be at a greater risk of default.

This begs the question - would you be comfortable buying a rental property without reserves? Personally, I would want at least 6 months of cash reserves with a minimum of 10% of the rent budgeted to further build my repairs/CAPEX reserves.

I have been told both. as for HELOC... if they want proof of reserves.... I cant imagine they dont have clients that use a rotating line, whether personal or secured by real estate, for a reserve.