If you need the credit right away, you could get a HELOC now and then when it comes time to renew you could refinance into a mortgage with a re-advanceable HELOC built in to the mortgage umbrella (and close the other HELOC). This way, as you pay down your principal on your residence, the available HELOC automatically increases.
We did this with our residence (with Scotia's STEP plan). Built in to our mortgage, we opened a $28k personal use HELOC (for personal emergencies or major renovations to our residence) and the rest was a business HELOC that increased its credit limit as we paid our mortgage. Very handy for emergencies and major renovations, and - yes - we used ours for a down payment as well.
We also utilized the Smith Maneuver. We used all the extra cash from our rentals for lump sum payments on our personal mortgage. This increased the available business HELOC. Then we used the HELOC to pay for extra expenses such as renovations. In less than 4 years, our personal mortgage was paid, leaving only tax-deductible HELOC debt.
CAUTIONS!!!
- Your debt coverage ratio (DCR) MUST support the extra debt. (This is no issue for us because we have mainly up/down duplexes so our DCR is impressive, but with single family homes people may have difficulty.)
- Although most HELOCs require payments of interest only, some banks use principal plus interest numbers in their DCR calculations when you apply for future mortgages.
- Having a high level of revolving debt (such as an LOC or HELOC), can decrease your credit score.
- As previously mentioned, being highly leveraged is never a good thing. (Although we currently have a high balance on one of our lines of credit, our overall loan to value (LTV) is quite conservative.)
In summary, HELOC's can be great tools to build your portfolio, but one must proceed with caution understand all possible consequences.