Anyone used a home equity loan to get a down payment?

5 Replies

Hi BiggerPockets,

I found an investment property that I think will cash flow very well, but I don't have cash to make the down payment. I'm considering pulling equity out of my primary home in a home equity loan (not HELOC) to get the down payment.

Has anyone had success doing this?  Anything I need to be aware of before I do it?  e.g., if there is a seasoning requirement to have the money in my bank account, or whether I'll need two lenders (one for the down payment, one for the actual mortgage), etc.   I'd really appreciate any guidance you might offer, as this will be my first acquisition using "creative" financing.

Thanks!

I did this to fund my first property and to BRRRR my second property. It’s a great way to go if you’re buying a property with solid cash flow.

@Joshua G. this is totally ok to do. If you have the HELOC in place already then keep proceeding with the plan. BUT if you don't have the HELOC in place please know that it could take 30 days to get approval for that product. Please let the lender you are using to buy the home know what your plan is. They might be able to account for this if needed

No seasoning required but they will need to see the payment on the HELOC after you draft the necessary funds in order to calculate your DTI properly. If you are close ask the HELOC bank how you would know what your payment would be. If it's not close then don't worry on it too much. The only thing to consider long term is that your HELOC is an Adjustable Rate product. So it might be hard to know what your payments will be in a few years. And after 10 years it will mature into something else entirely. Just have a plan to get this paid off more aggressively if needed. Good luck!

Andrew Postell, Lender in Texas (#392627)
817-873-0621
Originally posted by @Joshua G. :

Hi BiggerPockets,

I found an investment property that I think will cash flow very well, but I don't have cash to make the down payment. I'm considering pulling equity out of my primary home in a home equity loan (not HELOC) to get the down payment.

Has anyone had success doing this?  Anything I need to be aware of before I do it?  e.g., if there is a seasoning requirement to have the money in my bank account, or whether I'll need two lenders (one for the down payment, one for the actual mortgage), etc.   I'd really appreciate any guidance you might offer, as this will be my first acquisition using "creative" financing.

Thanks!

We are now in the process of getting HELOC with the intention to use it for down payment on duplexe. In the process of shopping for rates we got rejected ones for telling the lander the true purpose of obtaining HELOC. Most Landers will not let you use one for the investment purposes . So just tell them you want to renovate your primary residence. There is your answer to one question.

As to the other question. It depends. We found the lander who doesn't require any seasoning. Just ask the bunch of them beforehand.

Originally posted by @Andrew Postell :

@Joshua G. this is totally ok to do. If you have the HELOC in place already then keep proceeding with the plan. No seasoning required but they will need to see the payment on the HELOC after you draft the necessary funds in order to calculate your DTI properly. If you are close ask the HELOC bank how you would know what your payment would be. If it's not close then don't worry on it too much. The only thing to consider long term is that your HELOC is an Adjustable Rate product. So it might be hard to know what your payments will be in a few years. And after 10 years it will mature into something else entirely. Just have a plan to get this paid off more aggressively if needed. Good luck!

 We found a local credit union ,who offered us fixed rate of 3.99

3 years draw period 

10 years amortization. 

Thanks for your replies everyone!  They are all very helpful.  I ended up missing the opportunity I was aiming at (got sold right away, Philly is hot right now), but I will keep it in mind for the future!  

@Lana Lee , if you don't mind sharing, what is the name of the credit union you used?  

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