Can You Use Your Equity To Buy Another House?
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- Опубліковано 3 чер 2024
- After a few years of living in your current home, you might be interested in using that equity you’ve built up to buy an additional property.
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If so, great plan! Using equity in your home is one of the most common ways to transfer wealth that you’ve built in an asset and transfer it to another asset.
You’re probably facing two scenarios, either you’re:
(1) Using your equity to buy another home you’ll live in, or
(2) Using your equity to buy an investment property
In option 1, you’re using equity in your home to transition to another home you’re going to live in. Using equity this way is very common for a “move-up” purchase. A move-up purchase is where you take your equity and use it as a down payment to afford a larger home.
It’s almost like you’re climbing the ladder of home size with the equity you’ve gained over time.
In option 2, you’re using the equity in your home to put money down (or purchase in cash) on an investment property. Maybe you’re planning on flipping this property or renting it long term. Either way, this is a great option to make your money work even harder for you.
The equity in your home gains appreciation as your house appreciates, but in an investment, it appreciates AND gains cashflow through tenants.
So, how can you pull equity out of your home? First, you need to make sure you have enough equity to begin with. Most lenders will only allow you to have a max Combined Loan To Value (CLTV) of 80% - 90%, this depends on the program and lender.
Here’s how to find this out:
(Value Of Home) * (max CLTV allowed by lender) - (Current Mortgage Balance)
Here’s an example: let’s say you own a $300,000 house and you still owe $150,000 on it with a first mortgage. So, we would take $300,000 * 80%. That equals $240,000 as the max CLTV we can have. Then we subtract our Current Mortgage Balance from the CLTV. So, $240,000 - $150,000. That leaves us with ~ $90,000 we can pull out in equity.
Here are 3 ways you can pull equity out of your home:
(1) Selling your home first - this is the most simple, but requires you to either get pre-qualified with two mortgages (not easy to do) or risk selling your home without a solid offer on another home.
(2) Home Equity Line Of Credit - a HELOC is a line of credit that draws against your home’s equity. It may be interest only, but could have a variable rate. This is good for short term usage.
(3) Cash-Out Refinance - instead of a line of credit, you’ll receive a lump sum of cash for you to use and you’ll refinance your first mortgage into a fixed rate.
Using your home’s equity to acquire more real estate is a great option. Using built-up equity in this way will help you put your money to work and leverage it to gain additional income or a home that might appreciate more (especially if you’re moving to a good school district or desirable neighborhood).
Hey, my name is Kyle and I'm a Mortgage Advisor serving Tennessee, Florida, and Ohio. My goal is to help you get a crystal-clear home loan that helps you win the house you love. If you're ready to create your home-buying plan, you can reach me through any of the ways below:
winthehouseyoulove.com/
0:00 Can You Use Your Equity To Buy Another House?
0:59 Buying new primary residence
1:39 Buying instant property
2:39 3 main ways to pull equity
3:22 Sell
4:10 HELOC
6:31 Cash-out
7:59 How to calculate
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One thing to pay attention to, if you have a mortgage on your current property with interest rate that is LOWER than the market interest rate , leave it alone. To pull out cash from your equity , the cash and your existing mortgage interest rate will be matching the current market interest rate, you'd be increasing the interest rate on your old mortgage . you'd be better off taking out a new mortgage for your prospect investment.
Since you borrow only what you need, the loan balance on a HELOC is almost always lower than the balance on a cash-out refi. That means lower monthly payments. And your existing mortgage payment, rate, and term won't be affected by the new HELOC. In addition, HELOC payments are based on the amount of credit in use.
What about a home equity loan, not a HELOC, & you're able to take the cash out that way? Where the first lien is let alone with it’s lower interest rate.
@@kathyannbryant3243that’s exactly what I’m thinking
These are the type of classes we need in our highschools..
For sure!
Totally
I totally agree with you! I'm a cashier at a high school and they don't even know how to count their money!🤦🤣
That will never happen unfortunately
Well it's on youtube
The quality of your content-succinct, accurate and right to the point-is so good. Also, your calming tone of voice about complex topics make your channel very pleasant. Thank you for sharing so much valuable information! This is quickly becoming my favorite channel!
Thank you so so much!!
I second that!!!
I usually have a hard time understanding new housing concepts and felt like I understood this with one watch, you taught it so well! Super helpful!
Always delivering golden knowledge and advice! I just turned 23, closing on my first house at the end of June and will be using that as my primary residence to cash out refinance and buy my first investment property in the future! Thank you for everything you do 🤝
This is super informative and concise with a good quality recording. Thank you so much.
Glad you enjoyed it!
Good job , clear , calm and direct. Appreciate your efforts
Glad you liked it and thanks for watching!
Thank you that is awesome. How long must you wait before purchasing a second house? How much equity is good to purchase a second house?
Very straight forward and like the math. Thanks helped me figure out a cash out value.
You're so welcome! Thanks for watching!
This was great! Very thorough and helpful. And your voice made it even sweeter! Melodious.
Thank you so much for watching!! :)
I watched your video during my first home purchase and now I am watching it for my second home. You have been excellent. Thank you.
Awesome! Thank you!
@@WinTheHouseYouLove me too
Thank you for the simplicity
You're welcome!
Thank you for sharing some knowledge, it really clarified important points for me.
Glad it was helpful!
I don't even have an idea about mortgages but your voice is so calming like I'm watching an asmr. What a great video. What a great teacher.
Wow, thank you!
Just the video I was looking for thanks for making it understandable
Glad it helped
Thank you for this knowledge.
This is the best video out there on this topic by far! Thank you!!
Wow! Thanks for watching!
Thank you for making this clear.
Quick question 🤔 can I do Cash Out Refinance on a investment property?
Excellent excellent video. Perfectly communicated breakdown. Thanks for taking the time. Grateful
Glad it was Helpful! thanks for watching. :)
Cashout refinance on 1st bought primary residence home , use the equity as down payment on another home as new primary residence, convert my 1st home that was refinance to a rental property.
What lending terms are required when trying to achieve this? Does the refinance loan require 20 percent down since the house is now intended to be rental ?
Tax & insurance implications on the converted primary to rental ?
simple and to the point 👍🏽
Yay! Glad it was concise!
Kyle Seagraves → winthehouseyoulove.com
Thank you for a great video and sharing your knowledge!!
My pleasure! And also, thanks for watching. :)
The question is what rate of return do you want from the invested money? If the heloc is say 8% int, your rate of return on the invested capital needs to exceed that for it to make sense. Ive done it before and seldom makes sense in the end.
Thanks for a really informative video.
I’ve paid down a decent amount of my mortgage. It still have about 40% owing. When I looked at the equity I could free up to put down on an investment property, it seemed like it may not stack up financially. Rental income would be quite a way off covering the mortgage and costs of the property, and would be on top of the loan I have already on my main home. Interest rates are very high in NZ currently.
I guess it’s a question of whether longer term it will appreciate enough to make it worth it. Maybe. With the stress of that and being a single person, thinking focusing on paying down my own home mortgage and putting some into index funds may be a better way forward. Welcome any thoughts
This is right on time for me! My husband and I have a house appraised at around $285,000 to $300,000 range and only owe $63,000 and need our equity to do some upgrades but were told that a heloc wasn’t the smartest route by my mother but she wasn’t sure what other options were available and now I have our answer a cash out refinance and buy other properties or a property which we also wanted to do! Thank you,thank you for this information!!
I'm so glad to hear, Sarah!! You're welcome and thanks for watching!
When you do a cash out and your mortgage amount increases, do you get to keep the rate you already have?
@@Uskdr97 It's called Cash out REFINANCE, meaning you are refinancing your home, and that will be done at the current mortgage rates.
@@Uskdr97 refiancing right now would not be a good idea UNLESS you have a solid exit strategy, if you have a low rate then i wouldnt take the risk as a 2-4% is a great deal in this market.
You could also do a home equity loan through a credit union, take the equity & that way you’re not repaying interest only, as in the HELOC!
Thank you so much for sharing your knowledge.
My pleasure!
Thanks buddy. Exactly what I was missing
Thank you so much for watching!! :)
Excellent breakdown. Thank you
Thank you so much for watching!! :)
thanks for using your time to share this knowledge with us for free
My pleasure!
Apologies for the remedial question, with that $90,000, is that the amount that you have to pay back to the bank or is that the cash that we gained from the house that you can use for the down payment for a new home? Thanks
I have one question Let said if you paid off your mortgage. Can you able to take 100% equity to buy another house?
Is there any way to have the HELOC with 0% APR for some period (1 year?) like it happy with many credit cards?
My guy, this video is awesome! I’m a new realtor in the San Francisco Bay Area.
I just had two nice ladies that asked me about the market. They have owned their current home for about 20 years… They aren’t thinking about buying or selling but I didn’t use the words to tell them that they could use their home equity to buy an investment property with the current home they own! What you said in this video is exactly what I should have told them… I’m going to contact them again and hopefully I get a second shot of redemption to potentially encourage them to invest in a rental property 🙌🏼 Thanks for sharing!
Awesome! Thanks for watching & best of luck!
@@WinTheHouseYouLove l already have 2 buyers under my belt! 🙌🏼 I had a vision of doing exactly what you’re doing with your channel and then I found you. This motivated me even more and made me realize what my channel and my marketing could be through UA-cam 🙌🏼🤓
Feel free to reach out if you’re ever in the Bay Area. I’d love to stay in touch!
Thank you for this content. One question, Are you 100% sure you can use the refi cash out money for a new primary residence? Anywhere I read, it says you can only do that for investment property or a second home.
If it’s an investment cash out, yes
Great video! Subscribed as well! Thank you so much!!! :)
Is there a limit to how much cash one can take out of their home for a cash out refi? I know basically it's capped at 80% LTV. But what about dollar wise? Say if you have a primary worth 600, and you owe, 250 on, would you be able to take out 200 in equity through a cash refi? It's well within the 80% cap. So I'd assume yes. But I haven't seen any content on this to know for sure. I have 200k and would like to do the aforementioned scenario to buy an investment property for around 350 to 400k with all cash. 100% paid off. I just dunno if I can get that full 200k to do so.
YEs, you can do a Cash Out refinance to take $200,000 out in your equity. You just have to qualify according to your Debt to Income, Credit, etc. Your new mortgage balance will be $450,000 at whatever the current interest rate is. So, your mortgage payment will increase lets say $250-$450 a month. As long as your DTI can handle the increase then you are fine to do this. And in case you are wondering, MAX DTI is usually 45-47%
When talking about "Cash Out" option are you referring to taking a home equity loan?
Great info. What is it he probability of cash out options, and refinancing that in a year or two? Are mortgage companies actually willing to do that?
Thank you for this information super helpful
You are so welcome!
This was really great. Thank you
Very very informative! Thank you very much.
Really fast question, would ihave to refi for the helicopter? Or I'll be just approved for the equity I build exp.20.000, and got it kinda like a credit card but my mortgage stay the same?
Can I deduct the interest payments if I take heloc to buy an investment property?
How would one find out if we would even QUALIFY for a second mortgage on a second home, this video brought up that good point for me. Im about to start paperwork on a cash out option.
Usually, you need at least 20% equity in the home to begin looking at pulling out a second mortgage.
Start a conversation with a lender to see what options they have available or a gameplan to get you where you want to go.
Thank you. Great advice🙏
If I have an inherited property (no mortgage) and currently rent half of it out (this is my only source of income right now), and I want to move and downsize for myself (out of state), what options would make the most sense? It seems that I would have to wait around and collect rent for another year before I could qualify for any kind of loan income wise. (Per what I’m hearing as providing proof of income for 2 years prior). At least as far as I understand so far. And Bcuz since moving to a new state, I won’t have a diff job until after I move there. It seems that I might need to finance maybe $25-50k of the new place if I did a mostly cash buy for the new house. I just feel stuck and lost (first time home buyer). Any advice would be most appreciated.
The rent is steady and growing and pretty good money, but my heart is in another state. (And living with renters is no picnic for me lol). I have a fam arrangement with someone who wants to buy the house, but I also have to have somewhere to live when I leave. Or if I keep it and rent the other half out, I’d have to finance most of the new home I’m moving to. I also have no other debts and a so so not great credit score. (Above 620 but not much lol).
Do you have to so income to pay for both mortgages?
When do you start paying on the principal on the HELOC?
Hi, value of my property got increased a lot in 2021-2022, how fast I can apply for HELOC after a purchase?
Great video! Very informative. Question, I am looking to pull equity (heloc) out of my existing home for some repairs and use some of the money for a down payment on a piece of land to build a home on in a year. Can a heloc be used to put a down payment on a piece of land?
Yes
When u use the cash out method and refinance your mortgage 30k higher than original. Does your monthly payments increase to or you just have to pay longer
Great video! Does this rule apply to investment properties as well?
Thank you so much for watching!! :) I'm not sure which rule you're mentioning
Someone said you change the Heloc to a "rate of return" which is a higher cost heloc? Is that true when you use the heloc equity to buy another property?
Is the interest deductible using these types of loans? Publication 936 seems to indicate interest would not be deductible when using equity loans to purchase or invest in a separate property - is that correct?
Amazing video. Thank you
That's was very helpful thank you so much
Glad it was helpful!
What software do you use to have this split screen?
Thanks dawg, good explanation.
Thanks! Glad it was helpful!
Thanks for the info - useful well explained
Very well explain.
Thank you
Thank you so much!
Great video..simple explanation. Thanks
Glad you liked it. Thanks for watching. :)
Which would you recommend over the other when wanting to take the equity from your home to use towards closing costs and down payment on a new primary residence then sell the homeboy took equity out of ASAP. Cash out, home equity loan or heloc?
HELOC is likely the best
Thank you 🙏 you made it easier to understand if I want to take out equity from my home to invest in units here in Los Angeles.
Glad it was helpful!
Ok say I cash out on a 100k home and use that to down payment 2nd home could I repeat the process ok the 2nd home to get a 3rd?
Is it possible to use the equity of my current house to purchase a larger house and make that as our primary residence and have the former house be a rental property? Thanks.
I have an investor question for you..
I hope you could help me , Current mortgage payment is 1880 on duplex I only have to put up 480 $ a month to cover the mortgage with rents (house hacking)
If I refinance I can pull $83k out of the home to put towards another investment But then that would bring my mortgage up to 2,472!!
When I move out with my current mortgage payment the house will cash flow $1000+ a month,
If I refinance it will only cash flow 500 a month
Would it make sense to buy another asset By refinancing even though it will reduce the cash flow by 50% Kind of doesn't make sense to Purchase another house To make possibly 500 a month off of when I could make double with one- Or should I just hold off on the refinance and save to buy the next( wouldtake foreverto save 80k ) ?
I like this channel, keep up the good work
Thanks, will do!
This was perfect thank you so much
You're so welcome!
wow very helpfull video thanks for all infos.
Glad it was helpful! Thanks for watching. :)
Thank you
My pleasure. Thanks for watching!
We paid off our mortgage years ago. We are going to downsize and then sell our larger house in a couple years. Would a home equity loan or a traditional mortgage loan be better in this example?
Can I use Heloc if my house is in a living trust?
Thanks for the videos. I’m curious to know if it’s mandatory to put 20% down for a second home mtg? Do you have a video on that?
Thanks for watching! 10% is the minimum for second homes
This was super helpful thank you man
Glad you think so. Thanks for watching. :)
Thank you for the information it was great 👍
Glad it was helpful!
Thank you. Great info.
Thank you so much for watching!
If I take a heloc on my primary residence, that requires primary residence.Can I buy( closing costs)a new primary residence with the money without defaulting...because I do plan to sell the first.
What do you think about a home equity loan instead of a HELOC
Awesome video. Very informative.
Glad it was helpful!
Hey great work !!!!! Right on point !!!! , my question is I currently own a single family home and looking into buying my first rental property , I want to start the process should I deal with my current lender and then go too others lenders just to see who has the best rates and options? And also should you let the lender know your game plan on buying another property will that effect your options at all?
Use a mortgage broker and realtor with experience in rental properties and 2nd mortgage.
Steven, I know it’s been a few months since your post here and I don’t know how far ahead you are with your research for purchasing your second home…. What I wanted to indicate, and you may have already been informed, is that for second or investment homes the down payment will be a bit higher than would be on a first home. If you do qualify for a conventional loan, the minimum down payment will be 10%, but could be higher than this percentage depending on your own qualifying circumstances.
I have some
Equity on my home can I use that for a investment property, and qualify for a traditional mortgage for the rest 75%. And how do I pay off the equity? Also my mortgage is locked at 2.65 %, with these rates you don’t think cash out refi would work for me right?
This was amazing! Thank you!
You are amazing too! Thanks for watching. :)
Thanks for the info!
Thank you so much for watching!! :)
Can a cash-out from an existing mortgage be used as a down payment for another primary residence? A new mortgage would be needed to close on another primary residence. The intent is to sell the original primary residence.
What if you do a home equity loan, & take out cash without including the first lien?
Thank you for all tips .. I’m not working but I own my home is it easy to get home quickly out i?
I want to use the money for a smaller home and rent e one I’m in now
Hello, could this possibly work if it's a new construction home? Before moving in we had 40k+ in equity. Wanting to rent it out and purchase another home. Thanks
What happens in a recession/depression where the borrower is now unemployed and the housing market crashes 40/50% due to higher interest rates? Do banks account for this or are the banks banking on this scenario to ultimately get the property, sell it and start another cycle with new "home owners."?
If you get a Home equity loan on you house for a second house. Do you need to pay the loan balance and your second mortgage?
Thank you!!
You're welcome!
How often do lenders allow HELOCs to be used for a down on a new home? I have about 700k in equity (thank you los angeles) and want to pull 100k for a down on a 2nd home, but my current loan has a 3.65% interest so i don’t want to refinance since rates are double now! Are banks hesitant to allow you to use HELOC for downs?
so if I take out 40k HELOC from my first property, and want to use it as down payment to buy a second property, not only will I pay mortgage for second property, but also gotta pay the 50k HELOC correct? is there any way to mix the HELOC debt with the second property and refinance?
Hello, i have a question, can i used my equity to invest in an other business? 2. Can we have the equity in cash?
Great video and presentation. You can make good moves with your equity like purchasing an investment property.
For sure!
I was beyond excited you came up when I searched this! 💪🏽
I'm glad to hear, thanks for watching!
thanks for this!
Thank you for watching!
What an amazing voice!!!
Thank you so much for watching!! :)
Awesome. So now I understand. My next question would be, does it financially make sense to get a HELOC to upgrade to a second primary residence???
I think it would be worth comparing a HELOC vs a cash-out
No bridge loan?
Thankyou , very informative
Glad you think so. Thanks for watching. :)