HELOC question - notify bank before using it for investment?

[David Zimmer]

I recently closed on a HELOC and noticed verbiage in the contract that I was required to notify the bank if I plan to use the money for investment, rather than for personal use. Is this common? I assumed the money was mine to invest or use for personal use.

[Alex Breshears]

I agree with adhering to the stipulations in the loan file. If a lender found out that you had done something that could possibly be considered in default, they could technically call the loan due.  Right now, my personal opinion, lenders are likely going to have far more to worry about in the coming months than a loan that is performing and paying, no matter what the capital was used for.  Also - another personal funny moment - I love that our society says you can blow money at the casino with equity in your home, but don't you date invest it lol.  They may have a restriction on gambling to, but I just found that humorous reading the language they chose to include. lol.

As long as it is just notifying the lender, I don't see a problem with it. Something to also ask about is how long you can withdraw the funds. Many lenders were using 2 year lock outs, so you had 24 months to pull and put back, and then at the end of 24 months whatever you had drawn out was what became an amortized loan. If you have some sort of shorter lock out period like 2 years, maybe plan to draw it out and out it in an account for use.