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Is it possible to use a home equity line of credit (HELOC) as a down payment?

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Apr 26, 2023

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Buying a second home or investment property raises questions about financing, particularly when it comes to finding a down payment. Many wonder whether a home equity line of credit (HELOC) can be used. Learn more about this option and how it might fit into your plans.

What is a HELOC?

A HELOC, which stands for Home Equity Line of Credit, is a financial product that allows you to borrow against the equity you have built up in your home. Essentially, it's like a line of credit that is secured by your property. When you take out a HELOC, you'll be able to access a pool of money that you can use for a variety of purposes, such as home improvements, debt consolidation, or large purchases.

When you take out a HELOC, you'll be able to borrow a certain amount of money over a set period. During the first ten years, you'll typically only be required to repay the interest on the amount you borrow, which can make the payments more manageable. After the initial period, you'll need to start repaying the principal, usually over a period of 10 to 20 years. Keep in mind that your home is the collateral for the loan, which means that if you're unable to make your payments, you could be at risk of losing your property.

Can a HELOC Be Used for a Down Payment?

Those interested in purchasing a second home or investment property may find it beneficial to learn that a HELOC (Home Equity Line of Credit) can be used as a down payment, as well as for various other purposes. Many people opt to use HELOC funds for significant expenses like college tuition, unexpected medical bills, or a down payment on a home.

Hitch offers HELOC options to help homeowners quickly access the equity in their most valuable asset. With loan amounts ranging from $50,000 to $500,000, and up to 95% of the home's value, homeowners can secure funds at a low-interest rate to use as a down payment on another property or for any other purpose.

Benefits of Using a HELOC for a Down Payment

There are a number of reasons why consumers may consider utilizing a HELOC through Hitch for a down payment on a property. One of the most significant benefits is that a HELOC allows you to access the value of your home for investment. For many people, this can prove to be the most significant asset in your possession. This makes it easier to purchase a new home.

Additionally, a HELOC can allow you to avoid raiding savings accounts for a new home purchase. Thus, you can keep your nest egg in the bank for events such as emergencies or rainy day funds. People typically find peace of mind by having extra money available. A HELOC for a down payment can help.

Finally, a HELOC typically provides an interest rate lower than other options. While it is always a good idea to shop around, most people find a HELOC to be a financially beneficial decision when looking for a line of credit.

Consider Hitch to Help Leverage Your Home’s Value

If you are looking for financing for a down payment on a new home, consider unlocking your existing home’s true value with a HELOC from Hitch!

Borrow from yourself, not the bank!

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Equal Housing Lender
Hitch, Inc. 23833672158 NW Toussaint Drive. Bend, Oregon 97703

1. Qualified applicants may borrow up to 95% of their home’s value. This does not apply to investment properties.2. HELOCs have a 10-year draw period. During the draw period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) the total of all accrued finance charges and other charges for the monthly billing cycle. During the draw period, the monthly minimum payments may not reduce the outstanding principal balance. During the repayment period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) 1/240th of the outstanding balance at the end of the draw period, plus all accrued finance charges and other fees, charges, and costs.The lender will calculate this amount by taking the outstanding Account Balance on the last day of the draw period and dividing it by 240 months and then adding any finance charge that accrues but remains unpaid during the monthly billing cycle plus any other fees, charges and costs to the fixed principal payment that is due. During the repayment period, the monthly minimum payments may not, to the extent permitted by law, fully repay the principal balance outstanding on the HELOC. At the end of the repayment period, the borrower must pay any remaining outstanding balance in one full payment.3. The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Most borrowers get their cash on average in 21 days. The time period calculation to get cash is based on the first 4 months of 2024 loan funding's, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications. Closing costs can vary from 3.0 - 5.0%. An appraisal may be required to be completed on the property in some instances.4. Not all borrowers will meet the requirements necessary to qualify. Rates and terms are subject to change based on market conditions and borrower eligibility. This offer is subject to verification of borrower qualifications, property evaluations, income verification and credit approval. This is not a commitment to lend.5. The content provided is presented for information purposes only. This is not a The content provided is presented for information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Other restrictions may apply.