Buying new Primary with current Primary's HELOC

[Joshua Powell]

Hey guys, so a few weeks ago I closed on a 90 LTV HELOC for a duplex I househack. I was obviously was able to get this high of LTV because I was owner occupying the property. The HELOC is for $57k, but I had to use $30k of it to pay off a grant I used to help purchase the property (That's a whole other story, but essentially the grant had a ton of restrictions I didn't know about and after running the numbers I decided I was as way better off just paying it back) so only $27k is available right now. My plan was to aggressively pay off the $30k balance on the HELOC within 4-6 months while currently searching for new property to use the rest on.

Low and behold a triplex right on my street goes up for sale for $155k, and it looks like a solid deal. Since I live in a duplex on this street I know exactly what I can get in rent if I get the units updated (currently way under market rate for rent on month to month leases). If I could get it for $140k-$145k and update the property for $30k-40k, the ARV would be around $215k-$225k after getting rents up. I really don't want to use Hard Money for this as the property as it's in fine enough shape for conventional financing and the numbers wouldn't quite work given how expensive hard money is. I don't have quite enough to swing a ~$30k down payment and then another $30k-$40k in rehab, but I could do another 3%-5% low down payment loan and househack the place, then fix it up, get the rents up to place, and cashout refi sometime later next year.

What I'm really wondering is if the credit union that issued my HELOC would care or even know if I'm using the HELOC to buy another primary? When I initially applied for the HELOC, they asked if I planned to stay in my current residence for a year, and I said yes which was true at the time, but I didn't realize an opportunity like this would come up. Since I would be moving out of this duplex to the triplex down the street, would the credit union then call the HELOC due because its not my primary anymore?

[Brandon Plombon]

You would have to read your note in order to see if they can call it. Are you able to advance on your heloc using web or mobile? More than likely they wouldn't find out unless you told them what the heloc advance (downpayment on triplex) was for or if you went to them for primary financing on the triplex.

[Joshua Powell]

@Brandon Plombon Yes, the draw can easily be done on their mobile app or website. I already transferred all the funds to my checking account to start seasoning them ( I know some banks want to see HELOC funds seasoned). So I dont really see how they would know what I'm using it for. Also I wouldn't use them for the primary, I have a few other banks/CUs I could use. I just want to make sure I wouldn't suddenly get a phone asking for the HELOC to be due lol

[Brandon Plombon]

@Joshua Powell read your note to be sure but it would be unlikely - most banks don't care what the heloc funds are used for as they are already adequately secured with the duplex and it is your equity.

[Joshua Powell]

@Brandon Plombon Thanks for the help Brandon, read through the note carefully and didn't see anything regarding occupancy of the property, so it looks like I will be pursuing this.