Okay to keep using HELOC when I move out and rent house?

Question

Hello, quick question - I'm in the process of opening a larger HELOC on my primary residence, which I own free and clear. In two to three years I plan on moving and renting out my house - is it okay to continue drawing on the HELOC while it's a rental? I'm thinking it should be fine considering I will be opening and using it as an owner occupant for 2-3 years, and as long as I make timely payments the bank would have no reason to shut it down or restrict it in some way. I can't imagine they'd rather forego the monthly interest payments just because it's a rental property. Anyone have experience with this?

Ashley Schroeder · Answer

Also; I'm not sure if you have done a HELOC before, but many of them have a "time frame", such as the lender will reevaluate it in 5 years or so.  You might be able to use it during the initial time, but when you go back to "renew" they may not be so forthcoming, or want to do a different type of loan while using the home as collateral.  Just some thoughts!

Eric Jones · Answer

Good to know - I wasn't aware that HELOCs aren't bound by Fannie/Freddie guidelines. Thanks!

Chris Mason · Answer

There's no Freddie/Fannie for HELOCs, so each lender makes up whatever guidelines they wish.

It goes without saying that more conservative lenders with better rates will be more likely to say "no," and more liberal ones with worse rates more likely to say "yes."

Spending hours and hours shopping a 1st mortgage and worrying about $350 in closing costs being this way or that, honestly, is not the best use of most people's time. With HELOCs, however, the products vary so much by lender that you will encounter drastically different rates/terms/conditions/etc.