HELOC funds for downpayment on investment rental property

[cidley69]

Is this allowed, anyone done this?

If the property is cash flow positive enough to cover carry costs and HELOC payments would it make sense?

[pheoxs]

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Is this allowed, anyone done this?

If the property is cash flow positive enough to cover carry costs and HELOC payments would it make sense?

Pretty sure the first question they ask is did you borrow the money for the downpayment so I don't think you can anymore. Though maybe there's a way around that?

[killramos]

Kind of a lame source. But this was specifically addressed in CMHC rule change last year.

https://www.moneysense.ca/spend/real...e-to-covid-19/

No borrowed down payments.

I imagine if you had enough cash lying around to avoid CMHC, you wouldn’t be borrowing for your down payment. So likely where this starts and ends.

[holden]

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Kind of a lame source. But this was specifically addressed in CMHC rule change last year.

https://www.moneysense.ca/spend/real...e-to-covid-19/

No borrowed down payments.

I imagine if you had enough cash lying around to avoid CMHC, you wouldn’t be borrowing for your down payment. So likely where this starts and ends.

That link says you CAN use secured loans against owned property. This also makes the interest on your HELOC tax deductible.

[ianmcc]

The real ballers HELOC the entire purchase.

[cidley69]

Sounds like the jury is out on whether this is allowable.

Anyone done this?

If allowed, is it a good idea?

[ercchry]

It’s not borrowed funds as your collateral is your own asset. You can do this, but for qualifying the amount is going to be amortized over 25yr at benchmark rate

Good idea? Well... who the hell knows, too many variables, depends what the future holds on a hell f a lot of things (vacancy rates, borrowing costs, property appreciation, etc)

One way to get absolutely fucked would be in a declining value/increasing overnight rates situation... variable on heloc increases... property it’s secured on doesn’t have enough equity to refinance into a lower fixed rate

[ercchry]

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Kind of a lame source. But this was specifically addressed in CMHC rule change last year.

https://www.moneysense.ca/spend/real...e-to-covid-19/

No borrowed down payments.

I imagine if you had enough cash lying around to avoid CMHC, you wouldn’t be borrowing for your down payment. So likely where this starts and ends.

A rental is not an insurable loan, so no CMHC... also there are two other insurers, so cmhc’s decisions are not a complete hard stop

[ExtraSlow]

Everyone knows more leverage is smart. True for all types of assets.

[skandalouz_08]

You can do it but as mentioned above, lots of risk with fully leveraging a rental property. I just had a client use their HELOC to buy a fourplex as a rental. Ultimately, its at the discretion of the bank/broker to make it work through whichever lender they use and your overall credit rating.

[jabjab]

I'm using my HELOC to put a down payment on my next house and the bank knows. They do prefer a 20% down payment though if you have that available via the HELOC

[oster]

Why not HELOC into div paying investment instead?

[mr2mike]

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Why not HELOC into div paying investment instead?

As long as the dividend is higher than the interest rate.
Probably better than a rental.

[Buster]

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As long as the dividend is higher than the interest rate.
Probably better than a rental.

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Why not HELOC into div paying investment instead?

Dividends are irrelevant.

Fight me.

[Team_Mclaren]

Yes you can. The lender will take that into account to calculate your TDSR.

Why wouldn't you leverage with that low interest rate. Unless you are looking to switch primary residence. Then it might hurt you in that scenario.

[mr2mike]

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Dividends are irrelevant.

Fight me.

I'm not 65.
I don't buy a stock because of dividends.
But if this guy wants to... Enjoy!

[oster]

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As long as the dividend is higher than the interest rate.
Probably better than a rental.

Easy, investment loan tax deductible as well...