How to use HELOC to fund down payment?

Question

Hi,

I am going to be using a HELOC to fund my next property. The HELOC came with two starter checks in the mail I am able to use. How would I actually go about accessing the HELOC funds for the down payment? Would I need to write a check to my personal bank account and then get a cashier's check once the funds were transferred? Or can I transfer the money directly from the line of credit to the lender for the down payment?

Trying to think through the process of actually using the HELOC funds. I appreciate any feedback, thanks!

Sean

Jon K. · Answer

Other banks may be different but I have a savings account at the same bank that holds my heloc. They will not allow me to wire funds directly from the line of credit. So I have to transfer it to the savings account first, then wire it from the savings account.

Your best bet to get a definitive answer is to call the bank that has your heloc and ask if they can provide cashiers checks and wire transfers from it or not. Most title companies and closing attorneys these days want wires in my experience.

Sean McKee · Answer

Makes perfect sense! I'll have a call with the bank to clarify. Might be a good idea to open a checking/savings account with them rather than having to transfer the money to another bank to access a cashier's check or wire. That way I avoid any hold up with the transfer from the HELOC.

Thanks for your feedback!

Lynn Wong · Answer

@Sean McKee your plan sounds good. I want to get another property in Ohio but short on down payment, want to use HELOC for down payment then refinance cash out  to pay off the HELOC in couple years when there is some equity in my two new homes and interest drops. People talk about using HELOC but I am not sure how to use it for number to work and don’t get myself into the hole.

Sean McKee · Answer

Hi Lynn,

Not entirely sure what your plan is for the property the HELOC is on. My purpose for the HELOC is to get into a property without having a home sale contingency to increase my odds of the offer getting accepted. After closing on the property, I will then sell the house the HELOC is on. Yes, the timeframe between getting the new property and selling the old property is high interest and 3 different payments (old property mortgage, HELOC payment, new property mortgage). However, with high confidence my old property will sell quickly in my current local market it is well worth getting into the next property quickly if the numbers make sense based off the new mortgage.

Lynn Wong · Answer

I was wondering the same thing.  Here is my problem of using HELOC for down payment. I did some calculations and see my number doesn’t make sense if using HELOC.  Basically, it is the same as 100% finance with 2 payments. Thinking to use $50K HELOCwith 7.49% APR for down payment for $200K home. Monthly payment to HELOC interest only will be $312 added to mortgage whatever the amount would be (e.g. $1200 for 150k loan). The rent needs to be 1800-2000 to break it even ( including maintenance and PM). Am I calculating right?

How to use HELOC to fund down payment?

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