“Using Your HELOC as a Down Payment”

“Using Your HELOC as a Down Payment”




Hi Joe, I know I should know this answer, but not sure. I have a colleague at the bank that is purchasing a second home which will be her primary residence.  Can she access her existing HELOC on her current home and use the funds as the down payment on her new home?


Of course you can use a home equity line of credit as a down payment on a second home, as long as you understand that the monthly payments for the use of these funds are included into the debt ratio.


One more caveat, some lenders may require that the monthly payment for the HELOC be fully indexed. What does that mean? If the current rate is 3.5% and based on an adjustable rate but can go up to let’s say 10% then that is the rate that will be used for qualifying purposes.


Fortunately many of the lenders that I use will allow me to use the 3.5%. 

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Joe Petrowsky, NMLS #6869

Right Trac Financial Group, Inc. NMLS #2709

110 Main St.

Manchester, Ct. 06042

Office: 860 647-7701 x116

Fax: 860 647-8940

Cell: 860 836-9294

Email: joe@righttracfg.com



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Joe Petrowsky does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

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Comment balloon 3 commentsJoe Petrowsky • March 20 2017 02:40PM


Good information, Joe. I know a lot of investors that use a HELOC to fund the downpayment on another investment property. They just have to be careful not to over-extend.

Posted by Nathan Gesner, Broker / Property Manager (American West Realty and Management) about 2 years ago

This is valuable information you resented here, Joe Petrowsky and I have not given up on working a transaction with you in the future!

Posted by Sandy Padula and Norm Padula, JD, GRI, Presence, Persistence & Perseverance (Realty National & Geneva Financial, Llc.) about 2 years ago

Haven't done this much but it is also important to understand the risk of doing it.

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) about 2 years ago