Best option to buy an investment-rental property - 2nd mortgage?

[Anonymous]

Hello Everyone-

This is my 1st post and I would really appreciate any help you might offer:

I have a primary home I have owned for 6 years that I purchased for $675k and a home equity loan for $159,000 - fix at 6.71%. My house fortunately has appreciated greatly and was valued at $1.4 mm.

I have a strong income and would like to either increase my home equity loan or get a 2nd mortgage that would allow me to buy a rental property for $374k, plus the $159k and an additional $75k for a total loan amount of $608,000. First, is that even possible? And if so, what type of loan would make the most sense?

Thanks for your insight.

Kelly-

Message Edited by KellyD on 09-11-2008 07:17 PM

[BrianB_The_Loan_Professor]

Hi Kelly Welcome to the forum

First I am a little confused so help me out here

Are you saying you own a home and all you owe against it is the home equity line?

If that is the case here is what I would suggest.

Take out a new first position loan which will get you the best rate up to the conforming limit of $417,000. If you go over this you will get a higher rate unless you are in an area where the FHA limit is $729k but if you go FHA you will have MI unless you take out a 15 year fixed (which may be a smart option given the very low rates right now)

Then take the money you have and put it as a down payment NOT paying cash but dropping the loan to value on the Non Owner to a point where you will also get a good rate on it as well.

This way you have your debts spread out a little and if things fall apart you havent leveraged yourself too badly on your primary residence.

I hope this makes sense. The problem with going over the limit is the rates are not as favorable.

Brian

[Anonymous]

 

So you want increase your HELOC of your primary home to buy an investment property in this current market? Did you ever consider what happens if you can find renters for your property, can't sell it,  you suffered a stroke and can't work, or you lost your job? I wouldn't use your primary home to secure a loan; worst case senario you could lose both. You probably want to borrow against your HELOC because of the rate, it's not worth the risk. I would get a seprerate loan that is not tied to your home--granted, you will pay a higher interest rate on an investment property but you won't risk your primary home. Keep your home seperate from your business goals. If your credit is good, the rate for a investment property is not that much higher than a primary home. Check out reputable banks like wellsfargo.com

slickwithnomoney

I

[Anonymous]

I have a buddy who took out all the equity of his primary home to buy 3 investment properties.

He can't even give these homes away for free. He probably will lose his primary home to the bank.

Poor guy can't even sleep anymore.

[Anonymous]

Hi

I want to thank you for your great feedback. I agree, I do not want to risk my primary home. I really appreciate everyone's advice.

I will checkout another loan not attached to my primary. With all the changes w/ Fanny and Freddie, do you think interest rates will come down significantly over the next couple of months?

Any thoughts about Capital gains taxes in 2009? I heard the fed might change?

Thanks

Kelly-