Heloc as a Downpayment

[Sabrina Sanchez]

Hello BP community!

We have been getting several clients that want to use helocs as a down payment for their next purchase. In some situations I think it can work and in some other situations I think it can be risky. Does anyone have specific experience with using helocs for a downpayment? Does anyone strongly vote against it?

[Andrew Postell]

@Sabrina Sanchez Hmmm, so I might tackle this in a different angle - if the customer qualifies, and it's allowed, how do we ethically advise our clients on action? If they don't have any options, and a HELOC provides them with an option...even if that HELOC option is "bad" to us, it might be "good" to them. A HELOC has a variable rate - that's not so good. And now they are borrowing 100% of the value of the home? Yikes. After 10 years it "matures" and stops being a HELOC....that doesn't sound good either. But your customer can buy a house. So I will always encourage you to talk to you clients, listen to their goals, and if you have their best interests at heart then it will work out. Put their goals first. I hope this makes sense how I am describing it.

Also, if you are using a HELOC to purchase a property - that is 100% allowed. Lenders will allow that. No need to season.