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How to best get a combination of mortage and line of equity to buy a second property?
Hypothetical situation:
* I have paid off the mortage of my primary residence, appraised at about $600K
* I'm now interested in using the equity of the above house to buy a second/rental/investment property, sold price of $200K. How should I do it?
Option 1: apply for a home equity line from my primary residence, e.g. about $40K equity line to down payment for the second property and get a $160K mortgage.
Option 2: is there a way that I can apply for a $200K mortgage off the primary residence to pay off the second house? If possible, wouldn't this be better than option 1?
Thanks in advance!
3 Answers
- Anonymous1 decade agoFavorite Answer
I think you would have to compare terms to see which is more favorable. Lenders tend to treat investment properties differently than primary residences. You would have to find out the specifics.
If option 2 has better terms, I don't see what prevents you from going for it. When you refinance a primary residence, you wouldn't expect to face a lot of questions about what you intend to do with the money. I expect that wouldn't be of concern to the lender.
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- Anonymous1 decade ago
In my opinion option 2 is best. With the 2nd property paid off, if you have some life changing tragedy and can not make mortgage payments anymore, than you still have a place to live.