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Loan Purpose on 50/50 Loan

Answered by: 
Randy Carey

Question: 
Here is the loan scenario: We have a HELOC for $100,000. Collateral on the loan is rental property. The loan purpose is for home improvement. Our borrower stated that funds will be used as follows: - $50,000 to do home improvement on rental property, and - $50,000 will be used for home improvement on their primary residence. Would this HELOC be considered primarily for business or commercial purposes and why?
Answer: 

It is a business decision, but if the entire HELOC is going to be used for those purposes, why is this being set up as a revolving line of credit? What are they going to use the line for after the balance is paid down after the initial advances? I also would not want to be their accountant if they are mixing business purpose and personal purpose transactions into the same revolving account.

First published on 02/26/2023

Filed under: 
Lending
Filed under lending as: 
Reg. Z
HELOC

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