We did it.

We already had a HELOC in place before for some home repairs. I remember when we opened it the bank wanted us to list everything we were going to use it for - they tried to talk us into putting everything on there - more interest for them of course. At the time we were not looking to buy another house.

When the time came to use it as our downpayment, we just wrote a check for the amount to the bank where our new mortgage was going to be.

Our house did not sell the first two times we had it on the market, so we rented it out. We ended up selling it to the current tenants.

Whenever you sell your house, don't worry - the bank with the HELOC will get their money right off the top from your new mortgage company/bank.

Definitely ask about prepayment penalties. Ours didn't have any, but we had the line open for several years any how.

This worked for us perfectly. I recommended it to a friend and it worked out fine for them as well.

Good luck!
Sher

Thanks for the advice!
I'm really wondering if we need to take out the money now before we list officially. Or, if the heloc is in place, can we take the money out closer to the closing time of the new house even if the current one (with heloc) is already on the market. Does anyone know? If we need the money first we need to do it this week.
This is just a precaution so we can get new house at the end of April in case we haven't sold by then.
Thanks

You really need to APPLY FOR, and be approved for, the heloc BEFORE you put the house on the market. Most banks won't give you a HELOC for a house that's on the market.

once you've GOT the HELOC, they don't care.

You don't take the money out until you actually need it (whether that's a few thou now for presale repairs, or whether it's many thou later when you write a check for the downpayment for the new place). You just need to get approved for it. That's what a HELOC is.

Okay, so just to make sure I understand (sorry, I just don't want to screw this up and lose the new house), Apply for and get the heloc now, but we don't have to take out any money. Then at the end of April take out $X for downpayment of new house (if needed). They won't suddenly deny the money, right?
Thanks, and sorry to be so weird about this. Daily finances I can handle. All this stuff is a little stressful.

Roxyl, we are doing this now (closing next month) - we will not draw the money out until closing. Our house is not going on the market until we close - but our mortgage broker said that was not an issue (we are not on the market now). There is a prepayment penalty with ours if we pay off in less than 3 yrs of $500. What our broker recommended is that if we pay it off (we plan to when we sell our house) then he advised us not "close out" the line of credit (leave it open) - that way it is free for the first year, second year charge is $75, third year is $75 - total $150 vs the $500 charge if we call them to officially close the loan off their books. After that the HELOC closes automatically after 3 yrs unless we extend the term. Good question about how the open HELOC would affect credit (even if the balance is $0) - thank you - I will ask our broker that in the morning!!

You can also take the HELOC out against the new house, simultaneous with the primary loan when you close. Then you can pay off the HELOC when your old house sells, but still have the open line of credit if you need it in the future.

I wouldn't take out the HELOC on the new house. If something goes wrong financially, it is better to have only one of your houses mortgaged to the wazoo so that you don't lose both to a possible forclosure.

They won't suddenly deny the money, right?
Nope, that's what a HELOC is--a right to borrow money in the future, without a new approval. As you need it, a rapidly as writing a check (which is what you actually do).

If you trashed your credit between now and then, and they found out, I guess they could close your HELOC on your, but it's phenomenally unlikely.

Ah, but if you haven't taken the money OUT of the HELOC, then your home isn't "mortgaged to the wazoo." It just may mean that you find your ability to get new credit is compromised because you have so much potential debt.

I did find that I got a credit ding (AmEx lowered my credit limit on my Blue card) because I was close to the top of my $50k HELOC. If my HELOC had been for more money originally, they wouldn't have blinked at my $38k.

I just have to wonder if this is an advisable move in a declined market. I guess if you have a large margin of unused value in your current home it could work. But then you are really relying upon a timely sale of the first property.

Bumping to move troll spam down / off the page

"What our broker recommended is that if we pay it off (we plan to when we sell our house) then he advised us not "close out" the line of credit (leave it open) - that way it is free for the first year, second year charge is $75, third year is $75 - total $150 vs the $500 charge if we call them to officially close the loan off their books."

How can you have a HELOC on a home you no longer own? That was not an option for us - it's basically a lien against the house that had to be paid when we sold. I'm just curious as to how that could work?

The line of credit closes at the time of the sale. You're correct share_oh.

What about that little line of "did you borrow money for the down payment?" on the forms we had to to do?

Gloria

Thanks, yet another question to ask my finance guy (got a nice list of them now). My biggest issue is, how can I qualify for a loan on the next house, when I just added to my (potential) debt on the first house with the HELOC?