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Best way to finance down payment - Second Property

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Best way to finance down payment - Second Property

Hi, I'm looking into purchasing a second property and would like to know if there are any good ways to finance a down payment. The repayment period would be between 3 - 6 moths, would like to avoid paying high interest long term. Also looking for a solution which will not affect my DTI in a drastic way.

 

1. Long term personal loan.

2. Home equity loan on first property.

3. Balance transfer on CC.

 

Are any of these loans acceptable from a mortgage lender's perspective? I am open to other options as well. Thank you.

 

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Message 1 of 8
7 REPLIES 7
Established Contributor

Re: Best way to finance down payment - Second Property


@sergiulucian88 wrote:

Hi, I'm looking into purchasing a second property and would like to know if there are any good ways to finance a down payment. The repayment period would be between 3 - 6 moths, would like to avoid paying high interest long term. Also looking for a solution which will not affect my DTI in a drastic way.

 

1. Long term personal loan.

2. Home equity loan on first property.

3. Balance transfer on CC.

 

Are any of these loans acceptable from a mortgage lender's perspective? I am open to other options as well. Thank you.

 


1. No.

2. Yes!

3. Absolutely not!

 

Using a HEL or HELOC for either downpayment or outright purchase of a second home is just fine.

 

The other options you listed are definitely not ok for a downpayment.

EQ8:850 TU8:849 EX8:847
EQ9:850 TU9:848 EX9:850
EQ5:809 TU4:791 EX2:806 - 2019-08-15
Message 2 of 8
Contributor

Re: Best way to finance down payment - Second Property

Thanks for the reply iv. Which type of product would be more suitable if I plan on repaying the loan in 6 months? HEL vs HELOC

I am getting up to speed with equity loans, the idea of having a long term HELOC for future real-estate investments does resonate with me.

 

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10K Freedom | 20K BCP | 24K Discover | 30K Savor | 41K Venture | 45K BOA CR | Amex Gold
FICO® SCORE 8 (2/26/2019): Equifax 780 | Transunion 793 | Experian 790 | (Goal 780+ across)
Message 3 of 8
Established Contributor

Re: Best way to finance down payment - Second Property

A HELOC generally makes more sense for this.

 

Keep in mind that a HELOC usually has a 10-year draw period, after which it enters a repayment-only period.

 

But during that 10-year draw period you can draw on and repay the line any number of times as needed.

 

 

EQ8:850 TU8:849 EX8:847
EQ9:850 TU9:848 EX9:850
EQ5:809 TU4:791 EX2:806 - 2019-08-15
Message 4 of 8
Frequent Contributor

Re: Best way to finance down payment - Second Property

Is there an urgent need to purchase the property? Otherwise, if you're looking to pay off a down payment loan in 3 to 6 months, why not just save the money for that period and use cash as the down payment?
Message 5 of 8
Contributor

Re: Best way to finance down payment - Second Property

etx, honestly there is no urgency rather some favorable circumstances if I were to do it sooner. My plan is to rent out the current property and move closer to work.

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Message 6 of 8
Established Member

Re: Best way to finance down payment - Second Property

HELOC is the only option from the choices you presented. If you are thinking of being an investor, and without affecting your DTI, your best bet is to get the longest loan possible. You can, however, pay it off as fast as you wish.

The lender financing your new mortgage may try to refinance your 1st trust and the HELOC, then allow a cash out from the first property, to buy the second. 

Starting Score: 10/21/2016 Score 8: EQ 663 TU 670 EX 670
Current Score: 9/20/2018 Score 8: EQ 759 TU 764 EX 768
Current Score: 9/20/2018 Score 9: EQ 762 TU 803 EX 797
Mortgage Score: 9/20/2018: EQ 715 TU 737 EX 757

Message 7 of 8
Contributor

Re: Best way to finance down payment - Second Property

Thank you all for the replies, I'm contacting my credit union to see what's the best they can do on a HELOC and report back.

 

 

3.5 IHG | 5K Express | 5K Marriott | 8K Citi DC | 10K Synchrony Amazon | 10K Best Buy
10K Freedom | 20K BCP | 24K Discover | 30K Savor | 41K Venture | 45K BOA CR | Amex Gold
FICO® SCORE 8 (2/26/2019): Equifax 780 | Transunion 793 | Experian 790 | (Goal 780+ across)
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