Take HELOC and then move within a year or two?

[Anonymous]

I am planning to get a HELOC for improvements in my current home. My plans are a bit uncertain, however, and there is a possibility that I might forgo the improvements and decide to just move out within the year or two-- and rent out my current place -- in which case I would use the HELOC to help come up with the downpayment for the next home. My job is secure, and I am not concerned about not being able to pay the HELOC. Is there any issue I need to keep in mind, particularly if I get the HELOC and move out, say within a year?

[Anonymous]

Why would you pay interest when you don't need to?

[Anonymous]

Thanks. For various reasons, I don't want to liquidate other assets to pay for improvements or for funding the future downpayment if I decide to move out.

[Anonymous]

If you don’t use the helix on improvements to the primary residence you cannot legally deduct the interest on your taxes.

The interest on heloc is quite high right now, I would not spend money I don’t have at an 8% interest rate.

[Anonymous]

Seems completely reasonable.

The whole idea of a HELOC is flexibility. Doesn’t hurt to get it and have it available for when you decide to either do a reno or move.

[Anonymous]

Wouldn't the lender for house #2 object to this plan? (They would know the origin of the downpayment)

[Anonymous]

Anonymous wrote:Wouldn't the lender for house #2 object to this plan? (They would know the origin of the downpayment)

If OP draws the downpayment from the HELOC and places it in a money market account before shipping for a mortgage for house #2, the new lender would just see a current house with a mortgage and a HELOC and money for downpayment in the money market account. Why would the new lender complain, assuming OP qualifies for a new mortgage (and can repay the two claims in house #1, in part with rental income)?

[Anonymous]

Would the bank providing the HELOC take issue if house #1 is no longer primary residence within the first year? Does it matter?

[Anonymous]

Mortgage rates for home two will be higher than for a first mortgage.

[Anonymous]

Anonymous wrote:Seems completely reasonable.

The whole idea of a HELOC is flexibility. Doesn’t hurt to get it and have it available for when you decide to either do a reno or move.

Any issue if the combined LTV ratio in house #1 us closer to 90% than 80%?

[dcterp90]

Your LTV doesn't actually make any difference, because that only matters on a first mortgage origination.