“Using Your HELOC as a Down Payment”
Hi
Joe, I know I should know this answer, but not sure. I have a colleague
at the bank that is purchasing a second home which will be her primary
residence. Can she access her existing HELOC on her current home and use the funds as the down payment on her new home?
Of
course you can use a home equity line of credit as a down payment on a
second home, as long as you understand that the monthly payments for the
use of these funds are included into the debt ratio.
One
more caveat, some lenders may require that the monthly payment for the
HELOC be fully indexed. What does that mean? If the current rate is 3.5%
and based on an adjustable rate but can go up to let’s say 10% then
that is the rate that will be used for qualifying purposes.
Fortunately many of the lenders that I use will allow me to use the 3.5%.
