HELOC - what to say when the lender asks what the money is for?

74 Replies

Tell the truth.   If you're not sure that you'll be buying right away, just say cash reserves and potentially for future reinvestment. 

I've used HELOCs to purchase additional property (well more specifically for down payments) multiple times and I've always told the truth about those intentions and I've never had any issues.  

Ceaneh Alexis these are my top contenders:

State Dept Federal Credit Union (SDFCU) - 95% LTV and starting interest rate of 4.25%
Unify Financial Credit Union - 90% LTV and 4.75%
PenFed Credit Union - 90% LTV and 4.75%
Cornexus - 80-90% LTV and 3.49% for 6 months (4.08% thereafter)

I checked with many other lenders including the big banks and these were still the best from what I can tell so far. If anyone has any other HELOC lender suggestions, please share!

@Elizabeth Southall

You may be able to borrow more if the lone is on your primary residence. Since you are currently living in it, this is your primary residence. This might depend on how soon you plan on moving and what the fine print on your loan agreement says. I was told you can use the money for anything. It might depend on the bank though. I agree , do not lie on the application. Telling them it is for an investment property is the truth. Best of luck.

@Elizabeth Southall I think it’s a good question. I could use the money in my checking account to pay off my debts, and then use my Heloc for the investment. Or, I could use the heloc for debts and my checking account for the investment. Which is better? Or, maybe I want to season the heloc in my checking account for a while, and consider my options. What can we tell the bank then?

@Elizabeth Southall when I got mine I literally just told them I wanted to have it available in case I needed it down the road. I talked to 10 different banks/credit unions and none of them took issue with that (many said I was smart for doing it). I didn’t elaborate but I was honest and no muss, no fuss.

@Elizabeth Southall . I recently have it with them. They can do up to 95 or 97% ltv. The process is pretty quick and usually takes 2 to 3 weeks. I checked out other places but this was far best for me. If you mention that you are using for home renovation vs investment. You will probably get a better deal. Just a food thought. I went through many to get heloc. I would not recommend big banks.

@Elizabeth Southall

I asked my lender specifically what I could not use the money for and there was nothing on that list. I even asked him if I could go blow it all in Vegas and they had no objections. The reason is, it’s equity in my home and if I don’t pay it back, they get a house that’s much more valuable than the line of credit I’m using.

@Sandy Cunningham Yes, I went through Life Changer Loan. Unfortunately, they're only licensed in AZ/CO/CA currently. 
I ended up liking the loan so much that I left my job in medical sales to join the team. I had never heard of anything like it, 30-year access to equity, simple interest, automatic sweep. It's been a great item to have in my wife and I's financial tool belt. 

I told them the truth. Was planning on using for renovations on an investment property and improving an investment property. Now my HELOC was on an Investment property we already owned so that may be why they had no problem with it.

Yeah, that is a tricky one. A while ago one of the big banks I applied with asked me that question, and I answered that I planned to use the funds to buy my next rental property. Application denied. I told them I changed my mind and will actually blow it all on a fancy vacation, since apparently they think this is a better way to spend the home equity... Still got denied because they already knew I planned to invest it :(

Anyway, moved on to smaller banks and credit unions, and they have no problem with this. +1 for PenFed, you can qualify even if you're not military by making a one time donation to a related charity. They have great auto loans too, I planned to buy a car cash but figured I'd rather use the cash for real estate investments and get an auto loan with rate way below my HELOCs. As a side bonus, my credit score went up - apparently having that auto loan on my credit improved my credit mix (a bunch of real estate loans and zero balance credit cards with no installment loans is bad apparently).