How do you use a HELOC to mortgage a property?

2 Replies

I'm thinking about getting a HELOC so I can purchase another property. However, is this possible to do with a mortgage? I'm thinking about this now because I'm qualifying for another property right now with cash, and I was just reminded of all of sourcing, proof of funds, seasoning, etc etc etc. If I'm using a HELOC, will I need to cash a check from the HELOC and season it before I can use it for a down payment?

If not, is it possible to just write a check right out of the HELOC?

Did I do it backwards and perhaps should have gotten the HELOC first, bought the next property out of it and then used my cash?

@Martin L. I don't follow your post. Did you already get a contract and purchase another property with a mortgage plus cash for the down payment?

HELOCs work like this: you apply with a lender and once approved you basically have a checking account. If you get a check book with the account you can write checks or you can transfer money to another checking account to use it like cash. When you buy a new property and your lender asks to see proof of down payment funds you say you have a heloc and can send a statement to them (no real seasoning is required since it's already qualified funds). Having a heloc will impact your debt to income ratio for the new property since they will calculate how much per month your use of heloc funds will cost you.

Good luck

Thanks for the reply, Danny. It’s exactly what I needed to know. And regarding your confusion:

I’m currently working on a new approval letter to buy another property. I want to get a HELOC right after so I can purchase a second and possibly third property. My concern was whether I could use the HELOC directly. The first property will take up most of my immediate funds except for reserves, so if I could not use the HELOC directly, I would have been in trouble.