Hello, if I have a HELOC on a primary home and I move out to convert the house into a rental property, do credit unions/bank typically have an issue with that? I know they do not like to give HELOC on investment properties. In this case, everything was done when the house was a primary.
I know the other option is not to tell them but I would need to do an address change which may flag this.
It will vary by lender. I have a small local bank here that closed a Heloc on a borrower's current primary residence while she was in the process of closing on a new primary residence. They were aware of the new primary purchase and of her intent to convert the current residence (with their heloc) to a rental. Their opinion was that as long as the Heloc closed and 3-day recission expired prior to her closing on the new home, they didnt care. I had another local bank turn away this exact same scenario.
This is not a new strategy many investors use this strategies as you can go up to 90% CLTV when applying for a primary Heloc allowing you to tap into more equity if you have it. Helocs are available on investment properties but you can only go up to 70% CLTV. This limits how much money you can tap into if you have very little equity and still owe just below 70% of the value. When applying for new loans at least from my experience its never been an issue with any of our clients getting a Heloc on primary then converting that primary into a rental.