I am paid ahead (75k left) on my mortgage (house value of 300k).
I inquired to my bank about a HELOC with intent to use HELOC to pay for new house down payment (then obviously pay off HELOC.)
This is in line with some advice I got in this sub.
However, bank person said um kay we don't allow HELOCs for that purpose, but then went on to basically say they could still proceed with HELOC if it were for improvements to house.
Is this just sort of a game we play where the banks probably know what we're doing with it and it's technically allowed but people do it anyways, or do some banks (Huntington,) just not let you do that?
Halp. I'm an idiot. I asked my Bank about HELOC
byu/Specific-Name1503 inpersonalfinance
Posted by Specific-Name1503
12 Comments
Banks definitely play the “wink wink nudge nudge” game with HELOCs all the time. They ask what it’s for but once the money hits your account it’s basically yours to do whatever with
Just say home improvements and move on with your life, happens literally every day
you are going to have to play the game twice, once when you get the HELOC, then when the apply for a mortgage on the new house they are going to ask where you got the money, you might have to pull it out ahead of time.
Franklin mint credit union has HELOC for 4.99% intro rate for 6 months.
Don’t give banks false information for the purposes of obtaining a loan. Even if the bank is playing a game, it’s far too close to fraud for this to be good advice.
If you only plan to hold onto the debt for a short time, why not use a bridge loan instead of HELOC? This is what they’re designed for
Why finance house 1 to pay for house 2? Is there a benefit I’m not seeing as opposed to just financing the new house?
Just keep in mind that your next loan underwriter will also not be excited about the fact that all your “cash” for a down payment is actually coming from a loan. You might get it done anyway if you have enough other good stuff going on, but it’s at least a yellow flag.
They WILL ask where that money came from and what they want to hear is something like “I saved it up gradually over the last 5 years” or “I just sold a whole bunch of stock that I vested” and not “I mortgaged my kidney” or “my parents gave it to me as a gift but they’re broke and actually want it back soon.”
Make sure the heloc doesn’t drive your DTI up too high in order to qualify for the new mortgage.
Can tell because you wrote “Halp”, you don’t have to say it after that.
My CU will give a Home Equity Loan for almost any reason. But there is one very strict question in the application: Is the Property being listed for sale? If Yes, the online application immediately displays a message indicating this is not allowed and then closes the application.
You need a bridge loan. The new mortgage lender is going to ask where the money came from, and they aren’t going to like it when you say it’s borrowed from a HELOC.
HELOC loan documents will specify what the HELOC can and cannot be used for. If you use the HELOC for something that is specified as “cannot” and your bank finds out, you run the risk of having the HELOC cancelled and any outstanding amounts immediately due.