TIL about interest-only HELOCs the hard way at a Denver property closing

I was at a title company in Denver last month and the closing agent mentioned that some investors use interest-only HELOCs to keep payments low while flipping. I had no idea you could structure a line like that to defer principal until after the sale. Has anyone here used one for a quick flip?

3 comments

3 Comments

holly_walker7610d ago

Wait seriously? I had no idea you could do that with a HELOC either lol. That sounds like a crazy risky move though because if the flip takes longer than expected you're stuck with interest payments and no progress on the principal. I guess it works if you're super confident in your timeline but I'd be too nervous to try it myself.

riley_schmidt10d ago

Adam is right though that HELOC funds aren't treated as owner-occupied debt, so the bank won't call the loan if you're flipping.

adamgreen10d ago

My last flip I used a HELOC for the down payment and a hard money lender for the rest, closed in four months flat. The key was having a contractor who actually stuck to the schedule and a pre-listing buyer lined up before we finished the drywall. If you pad your timeline by 30% and keep a cash reserve for three months of interest, it's manageable but definitely not for the faint of heart.