Using HELOC for Investment Property Downpayment

[Brian Patrick]

Hello All,

My wife and I have finally made the decision to dive into our REI dreams and begin making the plans to make it all reality. We have set a goal of purchasing our first property in 2018 and are looking into different strategies. I currently own a home and was interested in the idea of using a HELOC for down payment on our first investment property. While it is an appealing option, I am unclear on if its a viable option - as it would leave me with essentially three mortgage payments (my residence, investment property, and HELOC payment). I was curious to know if any of you have used this method for a down payment or what you more seasoned investors thought of the idea. Any insight would be greatly appreciated.

Thanks guys!

[Dan Schwartz]

@Brian Patrick we haven't done this yet, but have discussed it with our mortgage broker to make sure we do it right if the opportunity arises.

There are two main steps:

1) draw on the HELOC far enough in advance so that the deposit doesn't show on the last two months' bank statements (provided that's how many statements you need to show).

2) be able to qualify for the new (investment) mortgage with the minimum payment on the HELOC included in your DTI.

So, yes, you'll likely have to qualify with all three mortgages (old, new, and LOC) counting towards your DTI. But don't ignore step #1, even though it comes with 2+ months of "wasted" interest.

Good luck!