All Forum Posts by: Sean Salandy

Brandon M. Chris Vail Matt Morgan Jon Deavers Mark F. Peter Fokas Peter MacKercher Thanks for the responses. I feel much more confident in proceeding. I will take heed to Jon Deavers and Mark F. 's advice as far as being upfront with the mortgage company as to the source of my downpayment. I would hate to hit a snag when it comes time to close. It is reassuring to hear those that have been successful using this method.

Thanks Art Allen for the reply. I've inquired with several banks and they all said they would not allow a HELOC if I was going to use it to purchase real estate. That's the tough part for me. Peter Fokas thanks for your reply as well. I will actually consider doing a few things around my home. I am in need of a new driveway. As far as using a separate account to write checks from, I will most likely do that. The only hang up is that I have the HELOC through my primary bank. I plan on opening a separate account with another bank in order to do most of my RE transactions. So, I shouldn't have a problem telling the mortgage company where I received the funds. I just always wondered about this topic.

Peter Fokas I'm not quite sure and maybe you can help me understand. If I am writing a $15,000 check as a downpayment directly using the HELOC checks they provide, is there I way they could find out that way? Now, one could say couldn't I just write myself a check for that amount and deposit it in a different checking account first and then write the check for the downpayment from the new account but wouldn't the mortgage company for the new rental property want to see that I had those funds in my checking account for several months?

I am planning to use my home equity line of credit that I received on my primary residence to put a down payment on a rental property. During the application process for the HELOC, I told the bank that I would be using the HELOC for home improvement. My question is, if I use the line for a downpayment for a property and the bank that gave me the HELOC finds out that I used it for real estate instead of home improvement, would they call the balance due on the HELOC(request that I immediately pay the balance off)? I'm not sure how they would find out but I'm assuming if I write checks against the HELOC, they could possibly find out that way.

Thanks for the tip William Hochstedler . I will look into a HML as well.

Robert Nason I am going to seriously consider what you are saying. I think disclosing my intentions up front will be best. Thanks.

Robert Nason thank you for answering my original question. If this is true then this exposes a major flaw in my strategy to rinse and repeat by refinancing after the seasoning period. I wouldn't want to start cutting off my options by turning banks off. I thought this was a common strategy. Do you have any ideas to get around this? Has anyone had any success with this strategy and if so, with what banks? Thanks again.

Chris Simmons I understand what you are saying and you make valid points. I'm not necessarily stuck on 6 months. I was just using it as an example because I was under the impression that it was a typical seasoning period. So really whatever the seasoning period is I will focus on it, hoping that the new bank will refinance based on the new appraised value after any repairs. Example REO property: ARV - $110,000 Original Asking price - $79,000 Purchased for - $70,000 20% down - $14,000 Amount Financed - $56,000 Refinance Amount 75% LTV (after seasoning period) - $82,500 These numbers are just an example The refi should cover enough for me to pay back the down payment amount and any repair costs (if repairs were within $12,500) so I can use the HELOC on another property. By the way, thank you for the link. If I'm reading it correctly, I would be able to do a cash out refi as long as it is after the 6 month period. One of the acceptable uses listed on the website is: •taking equity out of the subject property that may be used for any purpose;

I will look into DFE. Thanks for the tip. If nothing else, the refi should allow me to free up my downpayment money so I can reinvest it in another property.

Chris Simmons Pardon me if my posts have been confusing. In my original post I mentioned that I would be taking out a HELOC on my primary to use for a downpayment on the rental property. So, since the line of credit will only be used to make the down payment, I will be looking to finance the rest to complete the purchase of the rental property. Now, 6 months down the line I will be looking to refinance the rental property. So let's say the bank that financed the rental property was Wells Fargo and I refi that mortgage with a credit union. Would Wells Fargo be reluctant to provide a mortgage for a second rental property with me knowing I might refinance with another bank in 6 months? Shaun Weeks made the point that the bank (in this case Wells Fargo) would probably sell off the loan before the 6 months so it really wouldn't matter to them.