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Old 11-08-2011, 09:24 AM
 
6 posts, read 49,927 times
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Looking for a little advice and opinions from those who know about using HELOC for downpayment. We have an open HELOC for 50K which we have never tapped into, and our equity in our existing home should be around 80-100K. We will be buying a second home in new employment city before putting our existing home on the market (I am remaining behind while kid graduates, and I have four dogs I have to get out of this house before it can be marketed to its best).

We have enough personal savings in investment forms to cover a downpayment on the second home, but there is a big part of me that is highly interested in preserving my own capital for unforeseen needs and personal feeling of security. Would it make more, or less sense to tap the HELOC for this use?
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Old 11-08-2011, 02:54 PM
 
Location: Lending in all 50 states
189 posts, read 744,159 times
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Quote:
Originally Posted by furelite View Post
Looking for a little advice and opinions from those who know about using HELOC for downpayment. We have an open HELOC for 50K which we have never tapped into, and our equity in our existing home should be around 80-100K. We will be buying a second home in new employment city before putting our existing home on the market (I am remaining behind while kid graduates, and I have four dogs I have to get out of this house before it can be marketed to its best).

We have enough personal savings in investment forms to cover a downpayment on the second home, but there is a big part of me that is highly interested in preserving my own capital for unforeseen needs and personal feeling of security. Would it make more, or less sense to tap the HELOC for this use?

I'd look at taping your HELOC to at least help cover having 2 mortgage payments. As far as the down payment, that's going to depend based on the loan program.
I'd also recommend speaking to a CPA to see what, if any, your tax liability will be on the proceeds from the sale of your home. If you tap you HELOC for the down payment and to "float" 2 mortgage payments you may end up paying less taxes???
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Old 11-08-2011, 08:27 PM
 
Location: MID ATLANTIC
8,156 posts, read 20,063,622 times
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The mantra is leverage, leverage, leverage. But the real key is not for you to get holding the bag, either. I'm sure you've made that large purchase on a credit card and "we'll just pay of it when........" I think we all have one of those.....and then, "when" happened, there was another crisis or a different need, and now there's debt no one had planned on.

Most will advise no to use your own cash (except for Dave Ramsey). If you are financially disciplined, I don't see a danger, as long as you stick to your plan. I agree completely on the visit to a CPA.
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Old 11-08-2011, 09:07 PM
 
Location: South Jersey
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Check the policy of who your loan is with. My company will not let you use the heloc to fund the purchase of a new home if you plan on moving within 12 months.
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Old 11-08-2011, 09:45 PM
 
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My heloc allows me to transfer the funds directly into my bank account. Once it is intermingled with my existing funds, who can say "whose" money is used?
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Old 11-10-2011, 11:11 AM
 
Location: SF Bay Area
1,290 posts, read 1,854,166 times
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Originally Posted by furelite View Post
My heloc allows me to transfer the funds directly into my bank account. Once it is intermingled with my existing funds, who can say "whose" money is used?
Well you do have to document and explain any large deposits in your bank account that is not from payroll. Underwriters may not like where your down payment came from.
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Old 11-10-2011, 12:36 PM
 
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In that case, I can transfer it over the day of closing.
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Old 11-10-2011, 12:43 PM
 
Location: SF Bay Area
1,290 posts, read 1,854,166 times
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^
In the other hand you can't really use any fund that wasn't "documented" to begin with at closing time. The bank will immediately balk and delay the closing.
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Old 11-10-2011, 01:26 PM
 
6 posts, read 49,927 times
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It sounds like then, in this case, I should just use my own money at closing, then transfer the Heloc into my account afterwards to replenish my funds.

Or, I guess I could ask the loan officer well ahead of time if it would matter how I did this. I am thinking that if I have sufficient personal funds without the HELOC they won't care, but I don't know this (any loan officers know?) If they don't have a problem with it, I can do it up front. If it will be an issue, I can do it after the fact.
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