When my customers are looking to purchase a second home or investment property, the equity in their current home could be a powerful resource to make that happen.   I explain the benefits of using home equity financing as a down payment source on a second home or investment property: flexible terms, low down payment and affordable monthly payment options. They just have to qualify with that new Home Equity monthly payment. It also is good for showing reserves..because remember Investors....you must show 6 months PITI in reserves.

 
Posted by Dan McCormac on 06/21/2007 04:33 PM   Comments (14)  
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14 Comments on Using your Home to buy an Investment Property

JUN
21
2007
good post. Great way to buy another property ...using the equity in the house. There are still great loan programs out there for investors with low down where they might not have to use the equity either.
4:38pm • #1
Excellent advice!  I have been trying to get my mom and step-dad to do the same thing, but they just don't get it.
4:44pm • #2
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Another good idea is to refinance your investment properties and buy more and more and.....
4:47pm • #3
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Add to that if they are buying a 2nd home or investment property and put money down vs. 100% financing, their interest rate will be better.  So you need to take a close look at the short and long term effects for cash flow, wealth building, and tax benefits.
4:48pm • #4
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I like this idea and have used it many times in situations where the old house hasn't sold, and they want the new one. I think equitylines are really one of the best "buys" in the mortgage world.
4:50pm • #5
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I have done this myself.  However I would exercise caution and make sure that before they tap into the equity of their current home that they are planning on continuing to live in it for at least 3-5 years.  In a market where prices are unpredictible if they take out to much they might find themself in a short sale situation if prices take a tumble.
4:54pm • #6
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this is a part of the "new rules of money" that a lot of people are having a hard time grasping.

4:54pm • #7
JUN
25
2007
 Well that snippet generated some positive feedback. Thanks for the follow-up everyone.
10:04am • #8
JUN
27
2007
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What about combining this with a stated income loan?  If you have the scores and equity can you get a competitive rate?
5:56pm • #9
JUN
28
2007

There's always stated programs out there..but one of our programs is called a Straight 2 Close...which means if the borrower puts down 10%, has good credit and ratios are within guidelines....that's good enough for us...see you at closing. So it's kinds like a stated but under the full doc rates...which are much much better.
9:10am • #10
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Thanks, Dan - remind me to talk to you about this.
2:44pm • #11
NOV
15
2007
Thank you for the good advice. It is amazing how much you can do with home equity to make more money.
5:33pm • #12
DEC
13
2007
128,242 Points Outside Blog
I certainly understand the financial reasons for doing so, but the investor is also placing their primary residence at risk during a down market if they can not meet the debt obligations.  I always recommend against this strategy unless it is truely suitable for the investor. 
8:05pm • #13
JAN
25
2008
check out echostar financial, they seem to have novel idea. they looking at the market in an optimistic way, which is cool. echostarfinancial.com
penny
7:24pm • #14


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Dan McCormac

Lancaster, PA

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Home Sale Lending, LLC

Office Phone: (717) 286-9625

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