Home Purchase Mortgage Calculators
Mortgage Program Calculators
The short answer to your question is yes, it is possible to use the proceeds from a home equity line of credit (HELOC) on a rental property for the down payment to buy your primary residence. There are a couple of issues to keep in mind with this approach.
First, a relatively small number of lenders offer HELOCs on non-owner-occupied properties. You can contact the lenders listed on our Home Equity Loan Rate Table to understand the financing options they offer. Additionally, I recommend that you contact PenFed Credit Union, which is listed on our INTEREST RATES page. Credit unions such as PenFed typically offers more flexible qualification terms for HELOCs and home equity loans.
Second, lenders typically apply stricter qualification requirements for HELOCs on investment properties, such as using a lower loan-to-value (LTV) ratio. Using a lower LTV ratio may limit the size of the HELOC you can obtain and you may not be able to access sufficient funds for the down payment on your primary residence.
Third, the HELOC is considered debt when you apply for the mortgage on your primary residence, which may make it more challenging to qualify for the mortgage. Additionally, when the lender determines the debt-to-income ratio for the mortgage on your primary home, the debt figure the lender uses assumes that the HELOC is fully-drawn down, even if it is not. For example, if you have a $20,000 outstanding loan balance on a $30,000 HELOC, the lender assumes the full $30,000 is outstanding when you apply for the mortgage.
I recommend that you contact multiple lenders to understand how they would handle your unique situation. As mentioned above, you can contact lenders listed on our Home Equity Loan Rate Table as well as the lenders on our INTEREST RATES function. We advise you to contact at least four lenders as qualification guidelines vary. Plus, shopping lenders is the best way to save money on your mortgage.