Paper equity

Hi,
I’m looking to purchase an additional property (an income producing multi family) within the next year using the equity in my home as a downpayment. I’ve heard a little about it from this website and understand it works like this:

  • Get a HELOC on your house
  • Write a check to yourself for the amount you believe you will need to put down for the new property
  • Put the check in the bank and let the money get “seasoned”
  • When comes time to put money down at closing you can write the check from your own personal bank account

My 2 questions are…

  • Is this actually legitimate or could it be considered fraud since you are hiding the fact that it’s not really your money but merely a loan on your primary residence.

  • Isn’t the % of Home Equity loans (like in the ballpark of 18%) so high that your payments your primary residence would increase so dramatically that you couldn’t afford now to make both payments?
    If so can I assume I would be able to refinance on the primary residence immediately after closing?

If any investors, mortgage brokers, or whoever has any answers/advice I would greatly appreciate it.

Thank you

You can do this, it is legitimate, and in most cases (most lenders), you do not even have to let the money season. One of my clients is closing thursday and just drew the money from the home equity loan on his home today to get the check for closing.

ok thank you.

RJ,
Do you know if I can re-fi almost immediately since the % on the HELOC are very high?

Thanks