Mortgage Professionals ! Can You Use A Heloc To Make A Downpayment On Another Home?
I asked a similar question earlier today and a couple people said it would be fraud.
Looking around the web it is suggested on several websites as an option for home buying , but I can’t post the links.
We own our house valued at 70k.
We have a small home improvement loan out now 15k.
We want to buy a 125k house so we need 25k down.
Our mortgage broker suggested a line of credit, we can buy the house we want.Move.Fix up the old house a little bit.
Sell it.Then pay off the HELOC.
What is fraudulant ? I want the HELOC specifically to buy another house.
My broker said it would be cheaper interest than a 80/20 or 100% financing or even a bridge loan.(I should mention that he is a friend of the family and not likely to steer me into something illegal knowingly.)
Any advice would be greatly appreciated.
Thank you in advance.
As I answered in your earlier email, people do, do this all the time, but usually to purchase a 2nd home or a vacation home or even a rental property. Read below about your house on the market (could be a catch 22)
There is nothing wrong or illegal about it at all. Equity is Equity, period. As long as you can carry both mortgages totaling $140,000 then you shouldn’t have an issue. Banks don’t dictate what you spend the cash on. It is a line of credit to be spent how, when and where you like it.
However, home equity lines of credit are tied to the prime rate. Prime rate is currently 8.25% and adjusts monthly.
Read the following …http://money.cnn.com/2007/04/11/news/eco…
it is an article out today on CNNfn stating that the Fed may being raising the fed fund rate again. Add 3% to the fed fund rate and you get the prime.
Worst case scenario … it goes up .25% each month for the next 6 months or 1.50%. If you can handle these potential increases then go for it.
But, nothing illegal. However, like I mentioned earlier, check with him before placing your home on the market. Many lenders will not lend any money on a home if it is on the market.
You may have to get the equity line of credit and close on it first. Then put your home on the market. Then you can purchase your new home (with your home on the market) you can prove your new home will be a “primary residence” or in other words “owner occupied”
There is nothing wrong with using your HELOC to purchase another house. No one can tell you what to do with your borrowed money.
That is the way some investors flip properties by using HELOCs as well as credit cards for the down payment and doing the necessary repairs to place the house back on the market for sale.
I hope this has been of some use to you, good luck.
“FIGHT ON”
of course!
the new mortgage on the new home must be n/o/o or one that allows 2nd home financing. the rates will be slightly higher, but no fraud at all if you do it that way
I recomend you look deep in this article: HELOCs and Second Mortgages: Which One Should I Choose?http://easyunderstand.com/mortgage/58113…