Where does down payment have to be?

[Dan Golby]

So I'm starting to kick tires and look for my next rental property. Currently I have $40K in cash and $55K available on my personal residence HELOC.

I have heard that in order for your HELOC to count as "cash" for down payment purposes you have to actually take it out and put the money in a regular account and let it sit for 3 months. Could anybody tell me if this is true for all financial institutions?



Currently I use TD for all my finances but for this next house I plan to use a mortgage broker. My local TD branch isn't very good to work with.



Thanks in advance for your replies!

 

[Alvaro Sanchez]

Not true - full disclosure is the way to go.

 

[angelapeng]

It depends. Different lender has different policies. I recently obtained a new mortgage from TD, (Property will be closed in November), the down payment proof is from the HELOC on one of the rental properties. The key here is to make sure your debt coverage ratio is in line with their formula. If you use HELOC, the lender will include the cost of HELOC as part of their calculation, if you take it out and put them in the bank for 90 days, it will be deemed as cash savings, which helps for the debt coverage ratio calculation, though you have to bear the cost of 90 days interest.

 

[CurtisSvidal]

My comments as a long time RBC lender...the $55K sitting as available in the HELOC is fine as is...you are merely converting your home equity to cash and the 90 day sitting in an account history isn't required. As available HELOC it normally is all ready included in your debt service ratio (TDS).



Equity coming from an account usually requires a 90 day history and borrowing (unsecured creditlines for example) and then having the proceeds sit in an account for 90 days has been used to get around the requirement that it is "your" money (or a gift from family) going in. Some lenders will catch this and some won't.

 

[Dan Golby]

Thank you all for your replies. Now I need to go find the best lender around!