Is there some sort of regulation that addresses what Home Equity Lines of Credit must and must not be used for (such as commercial purposes) or is the only criteria that it should be secured by residential real estate? Along the same lines is there any regulations against setting up a HELOC and using the funds to construct or purchase the residence securing the loan instead of using a construction to to perm loan? Could someone atleast point me in the right direction as far as this topic goes?

You can use a HELOC for all the purposes you mentioned, unless there is some state law that limits the use of HELOCs.

A bank may have priced its HELOC loans for consumer borrowers with consumer-purposes. For this reason, there could be some banks which have internal policies that don't allow HELOCs to be used business or other purposes.

So if a HELOC were used for commercial purposes, no disclosures would be required, right?

Flood insurance regs would apply, at a minimum.

You would also need to look at the loan's purpose to determine what other regs apply. Is this a 1-4 residence?

How would you use a HELOC to construct a dwelling which secures the HELOC? I guess you could assign a limit based on the land value, but not necessarily on the finished dwelling value.

Thanks everyone. I agree, flood and an appraisal notice would be required regardless, but I was more unsure of Reg Z disclosures such as the HELOC disclosure and R of R. Thanks again.

What about servicing disclosures? Are they required on HELOC?

Nope.

Thanks!