HELOC for down payment

[Ricky Reese]

Hey BP community, I have read a few forums about the importance of a HELOC. I understand they can be very useful if used responsibly. For my current situation, I use conventional financing. The typical 20% down and 30 year term. Hypothetically, if I had equity in my primary property or rentals, could I use a HELOC from one of them for a down payment for another rental property? I know conventional banks and credit unions frown upon "borrowed" money for down payment. Not sure if a HELOC would be considered "borrowed" since the equity is there. Thanks in advance.

[Corby Goade]

@Enrique Zaragoza, sure. A traditional lender will require that you have 25% "skin" in any property, but that doesn't have to be cash, it can be equity. If you buy a house for $50k and put $25k in to it and it appraises for $100k, you've created 25% equity in that property, and a bank would loan you $75k on it, which is 75% loan to value. If you started with $75k cash to buy the house and make improvements, once you get a mtg from the bank for $75k, you could now start all over on another house and do the same thing without having to leave any money in that first deal. 

There are many ways to do this, feel free to reach out to me if you'd like to discuss further.