Can you use a home equity loan for a down payment on a new property?

Answer 1

From the desk of R I agree with the answer below. In most cases you should not have any issues writing a check from your equity line of credit as a down payment. In some cases if you are buying a property in the name of one of your business entities, you can deposit the funds from the line of credit to your business accounts. This gives you the seasoning you may need to get the remaining funding and gives you access to purchase through your business accounts. (Just keep records of how you funded your entity for tax purposes) If the lender does have an issues with funds coming from a HELOC just go find another lender. However, never get over leveraged! If you are investing in a property that you hope will appreciate you are making a big mistake. A rule of thumb should be as follows... If the investment will pay your debt service (mortgage payments) and produce cash flow you will build long term wealth. ....................................................................................................................................... Technically you can use funds from one asset to purchase another. If you are getting a loan for the second property the lender may ask where the down payment came from or if the funds are proceeds from a loan. In that case you need to declare that you are borrowing the funds. Some lenders will either turn down the loan or they will ask that you supply seasoned funds rather than funds from a HELOC. They are worried about the total debt you are taking on across the two properties. Other lenders will not care if the debt to income ratio is still below their cut off point. To not declare the source of the funds if the loan application explicitly asks would be mortgage fraud. A criminal offense so possible jail time if you are convicted of the crime