Using a HELOC to fund purchase of rental property

[Frank K.]

Hello All! I am new to this so please bare with me on my terminology.

Looking to purchase a home in my neighborhood to be used as a rental. The owner has walked away from a reverse mortgage and I am currently working with the lending on a short sale.

I would like to fund the purchase with a Heloc from my primary residence. This is not via a business -- I am simply pursuing this in my name.

Here are my questions.

-Does the lender care how I use the funds? Will I have to notify them if using for investment property?

-Can the interest on the Heloc be deducted from taxes? I am reading that while all 'mortgage' interest can be deducted, only up to 100k of Heloc interest can be deducted, but also read that it depends on the what the money was used for.

-Other than the risk of leveraging my primary residence and the variable rate, are there any other risks to this method I should be concerned with? The savings on closing costs vs. a trad mortgage are HUGE, not to mention the better rate.

Thank you all in advance.