Use family member's HELOC for rate arbitrage?

[Dan Dennhardt]

Hey BP community - looking for some feedback on this idea... 

I'm in the process of buying an investment property outside the US (Cayman Islands), for which I can get a (US Prime + %0.50) variable loan from the local bank. 

I did some research and I have a family member with a fully paid home in Ohio with a current value of ~$380k and excellent credit. It seems that family member qualifies for a HELOC up to $200,000 from Third Federal using a rate of (US Prime - 1%), or in other words, a 1.50% better rate than I get here. Given that this individual is not particularly interested in using the home equity for his/her own devices, is quite happy to lend to me at 0.25% above the HELOC rate (yes, I acknowledge I'm very lucky), it seems like it makes sense to take advantage of this rate difference.

I.e. I would borrow from my family member as an investor, who will tap his/her HELOC for the credit. I will then pay back at the +0.25% rate, the $65 annual fee (waived the first year) and (haven't worked through the details on this part yet) commit to a full repayment should the HELOC rate go crazy.

It seems like this is a reasonable way give my family member a return (meager, but otherwise unused anyway), take advantage of the different lending rates, and still meet the obligation to my local bank. Am I missing something here? Besides the general risk of variable rate loans, anything else come to mind?

Thanks!

What am I missing