I took a HELOC for ~$60k on our primary residence to fund a renovation on a rental property. My wife and I are planning on moving next year and we want to keep this house as a rental. Question is: If we decide to keep our current residence and rent it out, will the HELOC balance become due immediately once it is no longer considered our primary residence?
Primary residence: est. MV = $350k, current mortgage $248k, current HELOC $58k, net $44k.
Current rental: est MV = $375k, current mortgage $218k, net $157k
One option is to do a cash out refi on our investment property to pay off the HELOC. However, my math leaves me a bit short in terms of $$$...
$375k * 0.75% (max LTV) = $281k - $218k (current mortgage) - $15k closing costs (est 4%) = $48k. That leaves me $10k short, which I could pay cash but fear I might be strapped buying our primary residence (203k project).
Are my assumptions reasonable? Anything glaringly wrong here?
Originally posted by @Andre Brasser :
Question is: If we decide to keep our current residence and rent it out, will the HELOC balance become due immediately once it is no longer considered our primary residence?
HELOCs aren't like Fannie/Freddie loans where everyone is following the same rules of the road very closely with little variance. HELOCs are all portfolio mortgage products, and as such each lender makes up their own terms/conditions. Check with your settlement paperwork from when you got that HELOC.
Well your math is wrong for the closing costs, it should be 3-4% of the loan balance (at least here in Texas). Find yourself a good knowledgeable bank/broker and ask them what to expect. The average lender probably charges in the $1,200 - $2,500 for their closing costs, while title/escrow has their own fee's to insure the transaction (in Texas we are promulgated so our title fee's are pretty straight forward, no clue in MD).
Call a lender and find a title company, they should be able to tell you the closing costs the charge.
heloc terms are not the same as fannie mortgage terms (like @Chris Mason mentioned)
for instance I have a 90% heloc on an old primary that was ZERO cost, and the rate is prime -.001%. this additional LTV might help your cause.
a heloc is also not necessarily due once you move. In fact I don't know of any bank that would bother to track that information anyway
thanks for the response... checked the paperwork and it doesn’t explicitly state it has to remain my primary residence but it’s also vague enough I could see the loan called. However, as long as payment continue to be made, I don’t see their incentive to call it on full