HELOC on primary residence due if I move and rent it out?

Question

Hi All,

I took a HELOC for ~$60k on our primary residence to fund a renovation on a rental property. My wife and I are planning on moving next year and we want to keep this house as a rental. Question is: If we decide to keep our current residence and rent it out, will the HELOC balance become due immediately once it is no longer considered our primary residence?

Primary residence: est. MV = $350k, current mortgage $248k, current HELOC $58k, net $44k.

Current rental: est MV = $375k, current mortgage $218k, net $157k

One option is to do a cash out refi on our investment property to pay off the HELOC. However, my math leaves me a bit short in terms of $$$...

$375k * 0.75% (max LTV) =  $281k - $218k (current mortgage) - $15k closing costs (est 4%) = $48k. That leaves me $10k short, which I could pay cash but fear I might be strapped buying our primary residence (203k project).

Are my assumptions reasonable? Anything glaringly wrong here?

Thanks all,

Andre

Joshua Massari · Answer

I know this is an old post but wanted to add this reply if anyone is searching this topic. I had a heloc with a CU that I took out when it was a primary. I moved out and rented it for a few years. Then called back my LO at the CU to refi the heloc since the value had gone up. When they realized it was their loan and now a rental the LO told me that I wasn’t even supposed to have that loan anymore since they don’t do helocs on rental properties. She didn’t seem to care enough to report it and I ended up refinancing with another CU that allowed helocs on rental prospectors. I think this depends on the bank and of the allow helocs on rental properties at the time the loan was underwritten. As mentioned above, banks don’t really track this since they are not notified that the property has become a rental and it really only comes to their attention if you try to refinance with said bank. I suppose if that LO wanted to play by the rules and tell whoever needed to know, they could have ended up calling the loan, but seems highly unlikely that this would happen especially if you are making your payments on time.

Alexander Felice · Answer

heloc terms are not the same as fannie mortgage terms (like @Chris Mason mentioned)

for instance I have a 90% heloc on an old primary that was ZERO cost, and the rate is prime -.001%. this additional LTV might help your cause.

a heloc is also not necessarily due once you move. In fact I don't know of any bank that would bother to track that information anyway

Vickie Nguyen · Answer

Hi everybody, I have a HELOC on my primary. Now I want to buy a new primary and convert my current primary to investment. Is that change at any rate on my Heloc? Please help me.

Caroline Gerardo · Answer

If you are worried that lender might close the HELOC, draw all the max and put half in a short term CD and other half in checking.

HELOCS did get closed in the crash of 2008

A standard full doc refinance should have $3000 of hard costs plus impounds which are not really a cost, just on going expense.

Alison Marcus · Answer

Hello Joshua, I saw your note from about a month ago regarding a HELCOC on a rental property.  Could you share with me what bank you found that issues HELOCs on Rental Properties?  I'm having trouble finding one.   Thanks for your help!

Andre Brasser · Answer

thanks for the response... checked the paperwork and it doesn’t explicitly state it has to remain my primary residence but it’s also vague enough I could see the loan called. However, as long as payment continue to be made, I don’t see their incentive to call it on full

Ryan Haun · Answer

Well your math is wrong for the closing costs, it should be 3-4% of the loan balance (at least here in Texas).  Find yourself a good knowledgeable bank/broker and ask them what to expect.  The average lender probably charges in the $1,200 - $2,500 for their closing costs, while title/escrow has their own fee's to insure the transaction (in Texas we are promulgated so our title fee's are pretty straight forward, no clue in MD).

Call a lender and find a title company, they should be able to tell you the closing costs the charge.

Chris Mason · Answer

HELOCs aren't like Fannie/Freddie loans where everyone is following the same rules of the road very closely with little variance. HELOCs are all portfolio mortgage products, and as such each lender makes up their own terms/conditions. Check with your settlement paperwork from when you got that HELOC.

HELOC on primary residence due if I move and rent it out?

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