Line of Credit Usage - Posted by Scott S.

Posted by Scott S. on June 19, 2006 at 22:37:18:

Hi Patrick,

I do have my own home but not enough equity since I only bought it about 7 months ago. When I was speaking of the line of credit I was thinking more on the lines of a business line of credit (unsecured) which from talking to some lenders I could get about 100K.

I see what you mean though about the interest. So technically I could use a business line of credit for the downpayment but would then be paying interest the whole time on what I borrowed from the line. Is this correct or are their legal issues with this?

I spoke with a mortgage broker that I’ve used in the past and I can get the purchase and rehab money for a house rolled together as a construction loan for 10% down. So if rehab and purchase costs were 300K could I use the business line of credit to put say half down then use my cash for the other half. Then use my remainding cash for some carrying costs and misc?

I just don’t want to use all my cash for a downpayment if I don’t need it cause I only have 25K and in Northern NJ that doesn’t go to far.

Line of Credit Usage - Posted by Scott S.

Posted by Scott S. on June 19, 2006 at 13:51:04:

Can a line of credit be used to make a down payment on an investment?

I have about 25K of my own cash but wanted to get a line of credit and didn’t know if you could use it as a down payment on a deal then use my money to cover the carrying costs.

To clarify I’d be doing rehab deals, Fix and Flip, short term.


Re: Line of Credit Usage - Posted by Patrick S. Lawson

Posted by Patrick S. Lawson on June 19, 2006 at 15:45:06:

Yes. But I would do it the other way around if you can…Use cash for downpayment and HELOC for rehab.

Say the downpayment is 20K and the rehab is 20k and you use a heloc for the downpayment,from day one you are paying interest on that 20K until you payoff the HELOC. If you use cash for the downpayment and the HELOC for the rehab you are only paying interest on the money you use as you go.

All things being equal you will pay less in interest if you use the heloc for the rehab.