Are there Benefits to HELOC on Primary vs Rental Properties?

[Jesse Kleiber]

Hi all,

Feel like I have this one kind of sorted out but I just wanted to run it by some people who may know better than myself.

The plan is to pull out a HELOC to help subsidize a downpayment on my next rental property. The issue that I'm facing now is whether I want to pull it out against one of my rentals or on my primary.

I have found a bank that will allow me to borrow as a second lien on rentals but their rates are higher than what I could get when just doing it against my primary.

What I'm most worried about is what happens in a worst case scenario, should something drastic happen in the market.

From what I understand, using the money against a rental doesn't necessarily provide much more of a safety blanket in case things hit the fan because if, somehow, the HELOC lender can't recover their money, you'll get sued anyways. In which case, I suppose you can find the money somewhere else and not risk the house you live in. Whereas, if you were to default on a HELOC against your primary, you immediately go into foreclosure and have a bigger concern than getting sued?

All-in-all the amount of the loan shouldn't be substantial enough to the point where I wouldn't be able to cover it out of pocket anyways if need be, just want to make sure that I'm not missing anything.

Does it sound like I have the situation figured out or is there something I might be missing? Anyone faced this situation? What route did you go?