Down Payment- Credit Card @ 4.9% or HELOC @9.875? - Posted by Jason

Posted by Don Dion on August 29, 2005 at 19:05:20:

Fannie Mae, Freddie Mac and FHA will not let you use borrowed funds for your downpayment. Your best bet is to take them up on the NO MI 100% loan program if your short on cash for your down stroke and intend to live in the property.

Down Payment- Credit Card @ 4.9% or HELOC @9.875? - Posted by Jason

Posted by Jason on August 29, 2005 at 14:50:01:

Looking to buy a home for about $45k to be used as a rental. Home is valued at $50k (by the assessor). I have a credit card with a zero balance and a max of $15k. The company sent me checks I can write for any purpose at a fixed rate of 4.9% for the life of the balance plus a maximum $50 one time fee.
Plugging some numbers into - it looks like they will loan me a max of 37500 and a minimum of 36000(provided I qualify score = 732). Which means I would need to take at least a 7500 charge on my credit card for the down payment.
I can think of a couple of advantages to going this route - one of which could be that as the balance decreases, so does the minimum payment and so increases my monthly rental income.
A disadvantge perhaps would be the lack of a tax break afforded by the home equiity route.
Will the bank frown on doing this? Any thoughts? I need some guidance here.

Re: Down Payment- Credit Card - Posted by jimup

Posted by jimup on September 09, 2005 at 15:35:40:

If you put 20% down FNMA & FHLMC do not care where the 20% down comes from as long as you include the credit card payment in your debt ratio. They will also allow a gift of 20% without any funds from the borrower.

Credit Card @ 0% - Posted by arlanj

Posted by arlanj on August 30, 2005 at 07:49:26:

I have a credit card ($11,000 balance) interest free to April 06. I just got an offer for 0% on Balance transfers to Dec 06. I will be transferring the money in a couple of months. As long as they offer 0%, I will use the money.

I used the money roiginally to buy a house. I also borrowed against my free and clear 2003 Ford Explorer at 4.75% to buy properties.

Whatever gets the cash flowing.

Re: Down Pymt- Credit Card @ 4.9% or HELOC @9.875? - Posted by John B. Corey Jr.

Posted by John B. Corey Jr. on August 29, 2005 at 23:01:00:

A few comments without repeating what others have already said.

  1. Credit card loans with a fixed interest rate will normally be for a 5 year term or similar. When the rate is locked they many times lock the payment so it will not go down as the balance does. Also they might charge a higher rate on other charges when the loan is outstanding.

So, read the details. Some CC deals are great and others are less so.

  1. The ability to deduct the interest is not tied to the HELOC. The interest paid on the CC loan can be deducted as you used the funds specifically for a RE deal held as an investment. Check with a CPA or look it up on the IRS website.

  2. The HELOC might be a good second idea. If you can get both in place at about the same time they you have even more options for future deals. Just make sure you have the cash flow to support the debt service.

John Corey
Chelsea Private Equity LLC

Re: Down Payment- Credit Card - Posted by Rob

Posted by Rob on August 29, 2005 at 22:10:22:

Interview some of your local mortgage brokers. Some loan programs will require you to have the downpayment money in your bank account for at least 30 days. Some loan programs don’t care where the money comes from or how long its been in your account. Using a credit card is a great way to put a down payment on a owner financed property. If your line is high enough you can purchase the property outright and then refi to a certain percentage LTV for either rehab or cash out.