Can a lender determine what HELOC funds can be used for?

3 Replies

As I was asking around earlier this year to banks and CU's about opening a HELOC - I was told by a credit union that they do not allow HELOC funds to be used for investment properties.

Just curious if they can do that?  I thought it was basically our money once its drawn out of the account.


When you use credit unions or small local banks they have strict guide lines and "overlays".  They need to ensure that the loan is being used for those purposes as it falls under required guide lines.  But!  If you were to go with a bank who has delegated authority and does not have over lays you will be fine.  

I will also always advise my customers to do a cash out refinance to avoid these issues.  

Of course they can. They are lending you a ton of money, the can define their lending parameters as they see fit. Lending is all about risk, and if they are more conservative, they will ask. If you don't like it, find another bank or lender.