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6 Replies Last post: Aug 21, 2008 10:59 AM by Lighthouse24

HELOC status when renting property

Aug 24, 2008 9:06 PM

Click to view merpha's profile Start-up merpha 2 posts since
Aug 24, 2008
What happens if you open a HELOC and use the line when you live in the home but later had to rent the property out ? Will the lender close/freeze the line ?
Tags: business_plan, business_start_up, home_business, new_business, starting_a_new_business Report as inappropriate
Click to view Milleisen's profile Mogul Milleisen 129 posts since
Aug 6, 2008
1. Re: HELOC status when renting property Aug 25, 2008 9:43 AM
in response to: merpha
Very rarely will a lender close/freeze a line because you are renting the home out. Most banks don't monitor HELOCs to make sure you aren't renting the house. Once the HELOC is in place, there is really no way that the bank would know that you aren't living there. It may be written somewhere in the legal documents whether its a violation of the loan agreement, but the reality is that once the loan is closed, nobody is going to bother you as long as you continue to make payments per the agreement.
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Click to view merpha's profile Start-up merpha 2 posts since
Aug 24, 2008
2. Re: HELOC status when renting property Aug 25, 2008 11:07 AM
in response to: Milleisen
Thanks for your response.

When I rent, I will change the homeowner's policy to a landlords policy since I will not be living there. The insurance company will send an updated copy to the HELOC company -- the updated copy will indicate that I am not living there anymore, correct ? Do you still think the bank won't bother me ??
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Click to view Milleisen's profile Mogul Milleisen 129 posts since
Aug 6, 2008
3. Re: HELOC status when renting property Aug 26, 2008 1:42 PM
in response to: merpha
In my experience, people who process insurance policies aren't looking for that sort of thing. Not to say it couln't happen, but I don't think insurance processing areas set up red flags to catch people who rent homes out. In most banks, one area has no clue what the other is doing. As long as they can check the little box that says your property is insured, I'd be surprised if anyone bothers you beyond that.

That said, I'm giving you my opinion from my experience. Technically if you use the line for a commercial use and the bank wanted to, they could doe sure freeze your line or call the loan. As long as you are paying the loan as agreed, the chances of the bank being that nasty are slim.
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