Using PR HELOC for Down Payment on Investment Property

[Joseph Jackson]

Hello all.

Was hoping to get some people to share their experiences with doing this.  I have secured a $30k line of credit against my primary residence, primarily to be used for investment opportunities.  Ideally, I'd want to use this amount to cover the down payment requirements on an investment property.  

My question is do lenders ever push back on allowing a line of credit as the source for the down payment?  Brandon Turner mentioned this in his book as a way of securing financing without using your own checking/savings. 

If a lender will allow you to use these funds for the down payment, are there any other parameters that need to be met?  I have read that some may require the funds used for down payment to be accounted for in separate accounts for a period of time.  Is this commonplace, am I totally off, or any others thoughts?

Thanks!

[Fred Grant]

I have done this and it is an easy way to get started. 

You are increasing your overall debt and some will argue that further leveraging your primary residence is not a good idea. If the deal makes sense and the rents are going to allow you to pay the mortgage on the second house plus the HELOC then I think this is a good way to get started.

In my case, the HELOC was from the same place as the primary and they did an appraisal to make sure my total combined debt did not equal more than 80% of my homes value (so the HELOC lender will help prevent you over leveraging your primary).

With regards to the lender for the investment property, they could see that the down payment was coming from a HELOC so there were no issues with "where did the money come from and how long has it been there?"

Since my first purchase I have moved on to working with partners for financing, but I would still suggest the approach you are looking at for anyone starting out.