Using HELOC to purchase second home

That could turn out really bad or really good. You’re essentially leveraging yourself in the situation.

If you don’t know what you’re getting into and the risk associated you prob shouldn’t be doing this.

Depends on how fast you pay down the HELOC. In some situations HELOC rates are variable and the interest is not tax deductible.

Sounds like an awful idea. From what you're saying you have the money to put down so just use that.

As far as investments go you should be able to fund an investment portfolio because

a. you should have positive cash flow on the rental

b. you won't be paying the note on a HELOC

Not knowing what your income is you should be able to fund a brokerage account or roth IRA pretty easily from the spread on these 2 items

You would probably be violating the terms of your HELOC, if you took it out on a house that was not your primary residence. Now will they find out? Who knows

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We did that on our new house... paid heloc off in about 8 months. Worked out fine and super easy. Not sure why everyone is up in arms over this.

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And people have also successfully built a royal flush after drawing 4 cards, that does not make it a shrewd plan of attack.


OP

You had better look at your mortgage docs prior to renting, you may get a bad surprise if it states owner occupant and you rent it out. If notified they will most likely bump your rate which bumps the HELOC and have specific insurance requirements that are also more expensive.

Just do the math to see if it is even worth it now that most will not be claiming the interest deduction on their taxes.

You can do it. The idea carries a slightly higher risk of a major fiasco such as losing both houses, and you are simply leveraging yourself more.

If your current home is not in Houston or close by, you're also getting involved in the fun business of being an absentee landlord.

That said, it will usually work out fine. Just be aware you haven't found a risk-free way to make more money, and it'll soak up more of your time too.

No, we had no cash paying around for downpayment. We do have a lot (for us) left over each month so we could quickly pay off the heloc. Why keep 10's of thousands in a checking account? Anyway, do as you wish...

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You would probably be violating the terms of your HELOC, if you took it out on a house that was not your primary residence. Now will they find out? Who knows

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this. I would be worried this could be construed as bank fraud if I was OP.

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cash out refinance

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So it's interesting you bring this up, as I've gotten some letters from my lender about doing this.

If I already have cash on hand to be able to afford the down payment, what advantage is there to refinancing instead of using cash on hand?

Current house is in Odessa. Currently renting to a cousin and a coworker, hopefully would be able to fill the 2 rooms remaining if I leave. Otherwise, looking into the rental management option.
Also would plan on renting out rooms in new house.

I think what is important to point out here is that I would likely be paying about 40% w/ HELOC, remainder with cash, and still have some cash left over...close to 6 months on both payments.

I'm doing backdoor ROTH for this coming year, have some money in mutual funds.

Currently, I need to be doing more with income than shoveling it into checking/savings. But I do expect a pay cut when I move to Houston, so I don't expect to be able to build up cash as quickly once I get there.