HELOCs as a down payment strategy

Maria and James (not their real names 🙂) want to buy a rental property and keep their existing home, so they asked us to help them build a plan.

The first step was deciding where the down payment comes from: mortgages on rentals require at least 20% down. They were also uncertain about when to buy, because of COVID-19. It could be as soon as next spring, but they were willing to wait longer if needed.

For these two reasons, a HELOC (Home Equity Line of Credit) on their primary home was a perfect fit. They don't need to use any personal savings, because it covers the down payment on a rental property in their price range AND has plenty of borrowing room for any unexpected costs.

Equally important, they now have great flexibility to buy whenever they see the perfect opportunity, without costing anything in advance (no monthly fees, and interest is only charged after the funds are used.)

Contact us to discuss what solutions might work for you. HELOC rates start at Prime + 0.2%.