Concurrent Closing with HELOC to fund partial downpayment?

11 Replies

Hi all! 

I am based in NYC and looking to purchase a primary residence Condo in Manhattan. Has anyone successfully done a purchase with 20% down, 80% financing where the buyer only puts down 10% cash, the other 10% is funded by HELOC of the same subject property at closing? Esentially buyer will close the first mortgage at closing then simultaneously applying for a HELOC. I have heard about this financing method from a few people, but want to reach out to the BP community and the financing experts out there! Does this method work for both Condo & Coop in NYC? Thank you!

Originally posted by @Elizabeth Chang :

Hi all! 

I am based in NYC and looking to purchase a primary residence Condo in Manhattan. Has anyone successfully done a purchase with 20% down, 80% financing where the buyer only puts down 10% cash, the other 10% is funded by HELOC of the same subject property at closing? Esentially buyer will close the first mortgage at closing then simultaneously applying for a HELOC. I have heard about this financing method from a few people, but want to reach out to the BP community and the financing experts out there! Does this method work for both Condo & Coop in NYC? Thank you!

 I have never heard of this. Conventional loans will require proof of funds for down payment prior to closing. If it is a primary residence, why not just use mortgage insurance to reduce down payment? 

This is an 80-10-10/piggyback loan and works as you described except you're opening the first and second/HELOC simultaneously. This allows you to avoid PMI as well. It won't work for co-ops unless they allow 90% financing which most don't. The bigger issue you'll have is that many sellers won't be thrilled with a 90LTV offer. Depending on what price point you're looking the market is heating up and 90% is not going to be that attractive.

@Jason Lee

Thank you Jason! Yes this is exactly what I was looking for! Found a helpful article as well below, looks like I can position the offer as 80% LTV with convention loan since the Heloc is a separate loan that I'd be taken out at closing if I'm not mistaken.

https://www.nerdwallet.com/article/mortgages/80-10-10-loan-how-it-saves-you-money

Do you know any lender who has this product in NY? I’d appreciate the referral! Thanks.

You can call them what you want but it's still 90% financing and if you make your offer as 80% you're going to get tripped up when you get to the contract which would state you're looking for 80% max in the financing/contingency portion, then later on in the seller's rider where you represent you have the additional 10% cash to bring to the table. It's not to say 90% can't work but it depends on the price point, your competition, and how motivated the seller is. I haven't seen a 90% deal in awhile but I'm pretty sure Wells and Citizens can do it... and many others.

I've done exactly what your looking to do twice in Brooklyn.   Both were new developments condos as my primary residents.  I used Wells and it went smooth with no issues. It wasn't recently but it was a similar lending environment to now. Good luck! 

@Anthony Vander Meer That's awesome. Congrats Anthony! Do you mind me asking how did you position your offer to make it more competitive since it's really 90% LTV financing contingency in the contract which is not typical in NYC or Manhattan luxury condo space. How can I make a case to strengthen my offer? Thanks in advance!

Originally posted by @Elizabeth Chang :

@Joe Splitrock thanks for responding! My understanding is by doing this loan, I'd be able to avoid paying PMI as well!

 Thanks, I learned something new. This isn't something people do in my market, so had not heard of it. It looks like a good option for you.

I want to help clarify one comment I see you making here. 

When you start the loan application, the loan officer will start both the 80% 1st and the 10% HELOC and they must close on the same day, hence simultaneous. You don't start the HELOC after the 1st closes, otherwise if you did, you would need to come in with 20% instead of 10%.

I hope this helps?