Looking to use the equity in my home to purchase a second property. What is the best way to go about doing this?

Hi Frank! The best way to purchase a second property using the equity in your primary residence would be to either refinance your current first mortgage and take cash out, up to 80% of your properties value, or you could take out a second mortgage and use the cash to put a down payment on a second property. The second mortgage can be a Home Equity Line of Credit, or a fixed second mortgage. I would be happy to discuss your options with you. Nick Bebout - American Liberty Mortgage - 303-407-0824

Frank it would depend on your current situation. If you currently have a mortgage on your home we should review the current program and rate. If it is better than current terms, you wouldn't want to refinance to take cash out (as cash out refinance rates are always higher). You could look at getting a mortgage for the second property (using current home equity for down payment) - rates would depend on if the property was a vacation home or an investment (Rental) property. There are so many different ways you could structure this scenario - it would just depend on what you are most comfortable with. I personally, never use my own home as collateral when purchasing rental properties, as I always like the security knowing that I have a place to live and would rather the debt be tied directly to my other homes in the event something happens to upset the real estate market again. Feel free to email or call me with questions. We offer all the different loan types possible - refinance, HELOC (home equity) and purchase loans. Thank you,Justin Murray jmurray@WintrustMortgage.com (312) 256- 4065

You have 2 options.. You can do a "Cash Out" refinance on your primary residence, which will allow you to go as high as 80% Loan to value, then use those funds as down payment on the next property.. or you can apply for a "Home Equity Line of Credit" (HELOC).... there are pluses and minuses to both.. On the cash out refi, you will be refinancing your existing loan.. if you have a low rate, but today's' rates are higher, then you will end up paying the higher rate.. also, there are closing costs, which could be close to $2K to $4K... this is a new first position loan which can be a fixed rate.. It would require an appraisal, and you would need to provide tax returns, pay stubs, w2's, bank statements.. etc.. For a HELOC, Typically there is no appraisal.. the lender does an AVM (Automated valuation Model) which is less accurate than an appraisal, but there's typically no cost to you.. Also, most HELOC's have very small fees.. typically $300 to $400.. With a HELOC, you apply one time and have unlimited use of the funds for the first 10 years, and you don't have to reapply each time you need to tap into it.. the down side is that most all HELOC's are a variable rate (which will be slightly higher than current mortgage rates),and most only require you to make "Interest only" payments.... Also, after the first 10 year draw period, your loan now becomes a fully amortized 20 year mortgage where you're paying principal and interest. Personally, I would recommend the HELOC.. lower costs, lower payment, unlimited access for 10 years, and typically less paperwork.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

it's also possible to go to 85% of the property value for a FHA cash out mortgage, but that would trigger FHA "PMI" as part of the new payment- so usually a less than most desirable option. You might also look into options for borrowing from a 401k or life insurance policy with cash value. - If you are going to live in the next property you may have to finance your current one as investment which changes the criteria quite a bit. Pick an experienced, creative and reputable mortgage professional and let them help you work through the options.