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Consider if you are approved for a HELOC and you want to use it to buy a piece of property... would this be considered the same as paying cash for the property? To me, it seems like the same thing...
The source of funds does not matter. Cash is cash.
Extracting cash equity from an existing property and using it to buy another, with the intent of defaulting on the first property, is fraud.
Not saying this is your intent....just saying.
No it wouldn't unless you have already written against the HELOC and have your money sitting somewhere. For cash offers I require proof of funds and your HELOC acceptance letter is not proof. I want a bank statement with the funds in them.
HELOCs are getting revoked all the time these days. It is not the same as cash IMO.
No it wouldn't unless you have already written against the HELOC and have your money sitting somewhere. For cash offers I require proof of funds and your HELOC acceptance letter is not proof. I want a bank statement with the funds in them.
HELOCs are getting revoked all the time these days. It is not the same as cash IMO.
So then it is basically as cash.... If I wrote someone a check from a HELOC and they cash it, then it would be sitting in their bank account... and then they use the cash to buy the property... so its basically cash... albeit one that has an interest rate attached to it...
So then it is basically as cash.... If I wrote someone a check from a HELOC and they cash it, then it would be sitting in their bank account... and then they use the cash to buy the property... so its basically cash... albeit one that has an interest rate attached to it...
The fine print on a HELOC pretty much always has some prohibition against using the proceeds to buy another property. The reason they do this is basically so they cover themselves against you "running out" the equity on one place to get another place when you are facing default...
The lender COULD immediate call the HELOC and then you'd be in a pickle, but if you are going to settle the HELOC upon closing for the existing home (assuming you will be selling and are not underwater...) there might be some "early closing" fee but that is standard.
You also have to be careful that the lender that would be writing any loan on the new palce is aware of what your total debt::equity is and the status of the HELOC so that there is no chance that they think you are trying to scam them. The lender may have some restriction against using "borrowed money" that you need to disclose as there typically is some lag between the reporting that one could theoretetically exploit...
We used a check from our Heloc to buy a piece of property with no strings attached. As a matter of fact, our banker knew that was our intention when we took out the Heloc.
We used a check from our Heloc to buy a piece of property with no strings attached. As a matter of fact, our banker knew that was our intention when we took out the Heloc.
When property was rising in value lenders did not worry about equity from one property financing another. Things are quite different now.
I would guess many of the folks that had lenders close their HELOC were in states that doing so was easier than modifying the terms of the line of credit.
I am one of the nuts that actually reads those fine print "Important Notices" from my "Financial Institution" -- when they mailed mine I asked about the clause about real estate and they said "sorry we gotta do it"...
When property was rising in value lenders did not worry about equity from one property financing another. Things are quite different now.
I would guess many of the folks that had lenders close their HELOC were in states that doing so was easier than modifying the terms of the line of credit.
I am one of the nuts that actually reads those fine print "Important Notices" from my "Financial Institution" -- when they mailed mine I asked about the clause about real estate and they said "sorry we gotta do it"...
We purchased the land in Sept. of 2007, with the intention of selling our house and moving there. What did happen to us though, was after we bought the land, we started building a garage/apt. on it, and during the construction, the bank pulled the rest of the balance of the Heloc, and they do it without warning you first (think checks already written, etc.) They don't want to tell you they are pulling the line, so you don't go out and spend it. We always checked the balance on the computer, and one day it was gone. We received the letter saying it had been taken back about a week later.
Anyway, when we went to our local branch and explained our situation, they gave it back to us. Phew, that was a close one.
The source of funds does not matter. Cash is cash.
Extracting cash equity from an existing property and using it to buy another, with the intent of defaulting on the first property, is fraud.
Not saying this is your intent....just saying.
I recently had a buyer that wanted to max the HELOC to buy a property. When I pointed out that since they two properties were in different areas that if she was intending to short sell the other home it could be consider fraud, she call the lender and asked! The lender closed the HELOC immediately. The buyer was angry but at least she's not in jail.
Many are finding their lines of credit and credit card limits cut or closed even if their credit is stellar. Lenders are trying to limit their risks across the board. Recently 24 million people had their limits cut for no reason other than they had a larger line of credit than they were currently using so lenders figured to leave it out there increases their risk.
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Well, you might want to read you loan docs...
