Posted by Helen on December 22, 2000 at 22:35:16:
From what you say, I don’t see any problem. Basically the banks and mortgage companies are concerned that you can make the monthly payment. If you can, by all means go ahead with the deal if you really like the place. No with that amount, there would be no PMI to think about.
Using Home Equity Loan to Finance 2nd Home - Posted by Buddy
Posted by Buddy on December 22, 2000 at 17:47:41:
Can someone help me with this and let me know if I’m doing this wrong. This involves financing my personal residence. Here’s the scenario…I live in a house right now with $40K equity and am in the process of cancelling the PMI. I want to keep this home and rent it out. At the same time, I want to move into another home with an asking price of $200,000.
I don’t have any cash for the downpayment on the 2nd home and was thinking I could just use the $40K in equity from my current home by taking out a home equity loan and then use that as my 20% down payment on the 2nd home. That would prevent me from incurring PMI charges on the 2nd home, right?? And at the same time I’d be able to keep my 1st home with no PMI and rent it out, right???
I welcome your thoughts and advice…
Re: Using Home Equity Loan to Finance 2nd Home - Posted by dewCO
Posted by dewCO on December 23, 2000 at 18:36:39:
Yes you can do it and people do it every day. Just get things in the right order. Get rid of the PMI first. Then get your home equity line. When they ask what you want it for DON’T tell them to buy another house=probably won’t make you the loan. Tell them for investing. Then after the HELOC is in place draw it down for the money you need for your 20% down, if there is enough there.
Re: Using Home Equity Loan to Finance 2nd Home - Posted by will
Posted by will on December 23, 2000 at 04:49:57:
i will assume that you want to upgrade to a better home and that you are not selfemployed .
my advice :
if your present home satisfies your basic needs , stay put .
so many people buy a more expensive home as soon as they can afford it , just becouse they believe they deserve it .in reality they have to work even harder to keep up with the higher lifestyle .and the cicle never ends :make more money , spend more money .
how about : make more money , spend less money and invest the difference into something that brings money back in your pocket ?
to make a long story short , cut down on expenses for awhile and save toward downpayments for a few rental houses (there are 5% down programs available ).buy each one carefully , as cheap as you can.save your cash flow and reinvest it in more properties .
plan ahead and don’t max out your borrowing ability .
if you don’t have other choices but maxing out , do it ONLY for very short periods (flip), just to generate more cash (many investors go belly up due to overleveraging).example :get a line of credit on your home and buy a fixer-upper.rehab and sell a.s.a.p. and IMMEDIATELY pay back your line of credit .use the remaining profit for long term investment (rentals ).
you can do rehabs from time to time to generate cash for downpayments. if you get tired of them , just sell a rental once in a while and cash out the equity .
in my experience the most important rule as a fresh investor is to NEVER spend your rental cashflow on yourself, but reinvest it .if you violate this rule, you become dependent on the rental cashflow for your everyday spending .as a result ,unexpected vacancy or maintenance or repairs become a direct threat to your lifestyle and sooner or later you get fed up and have to reorganize your investment philosophy .this is also the point where some people quit or go bankrupt. careful investing is a slow process and involves some frugality but in long term it will replace your paycheck (and some ) . and that’s true wealth.
happy investing
will