Can i use my home equity to buy another home?

Discussion in 'Personal Finance Q & A' started by Tiplady, Jul 20, 2016.

Welcome to the Find Some Money Forum
I Need 1000 Dollars Right Now

I Need 500 Dollars Right Now

I Need 100 Dollars Right Now

- The Find Some Money Forum is a community of members dedicated to helping each other Find More Money.

- On this forum you will find information on making money, saving money as well as investing money

  1. Tiplady

    Tiplady Newbie

    Can I use my home equity to buy another home? I bought my home just before the 2008 great recession and experienced a few years of negative equity. Now house prices have risen substantially and I'm now in a position where I have substantial equity stuck in my home. My plan was to somehow release this equity and then buy a second home which I could rent out and enjoy passive income in the form of rent. I've finally paid of my consumer debt, and have my financial house in order thanks to this forum. Now I want to build a secure stream of passive income for the future. If anyone has any thoughts or ideas please let me know.
    Miles and Simrin like this.
  2. Mike Baggaley

    Mike Baggaley Newbie

    I think its a very good idea as long as the sums add up. To release the equity you would have to remortgage your existing property so the new mortgage is equivalent to the market value of your home. Suppose your property is valued at 400k and you have 70k mortgage you would have an additional 330k to play with once you remortgage your property. You can also use a home equity loan to buy another home.

    To get your mortgage you will have to show you can afford the payments. The mortgage payments will shoot up so you need a way to pay this. If your income covers the increase in mortgage payment then your application will be successful so long as you have a good credit score. You can also ask the bank to take into account the rental income that you expect to receive when working out affordability. You should also consider getting a VA loan for a second home.

    You should shop around as much as possible for a good mortgage rate. With interest rates so low I would choose the most competitive rates for the longest period of time so you know that your costs are fixed. You will have to forecast your rent and show that it is 125% of mortgage payments so you have money to cover everything. I hope everything works out for you and well done for progressing your finances!
    Miles and Simrin like this.
  3. Simrin

    Simrin Newbie

    I like the idea. I'm always looking for ways to increase my passive income streams and buying a property to rent out ticks all the boxes. What you should look into are the following

    1. Home Equity Loan Second Home Loans
    2. Second Mortgage Refinance Loans

    Do not get confused with equity release from property as these types of loans are for people who retire and want to release income to fund their retirement. The best bet is to remortgage your property by securing the highest valuation. The most important thing you need to do is work out if the second home will be profitable. This means doing a rental forecast analysis. Work out how much you can expect in rent for the type of property you want to buy and then work out how much profit you will make after making the mortgage payment. If as Mike says the analysis shows the rent is 125% the mortgage payment the remortgage should be a success. Good Luck!
    Miles likes this.
  4. Miles

    Miles Newbie

    For me the best form of passive income is rent and the best way to buy a second home is by remortgaging and releasing value from current property. I have experienced severe hardship and renting my property while living in a car helped me to fix my finances. Once my finances were fixed and my credit score lifted I applied to remortgage my property and had enough equity to but a small apartment which I live in. I now rent out my first property and the rent covers the mortgage costs and my monthly expense which makes me financially independent in terms of living arrangement. It was one of the smartest moves I made and highly recommend it.

    Just do your homework property. Find a decent property which you can add value to. Try and maximize the space and add as many habitable rooms as possible. Secure the highest rent by doing the property up to a high standard and find a good deal when your remortgage. The longer the term of the remortgage the better because its good to know fixed costs. Make sure you add insurance and do a thorough rental forecast analysis. If everything looks good then go for it.
Similar Threads: home equity
Forum Title Date
Personal Finance Q & A Can i get a home loan with no money down? have good credit Aug 4, 2016

: make money

Share This Page

Popular Posts

I Need 500 Dollars Right Now

I Need 400 Dollars Right Now

I Need 300 Dollars Right Now

I Need 200 Dollars Right Now

I Need 100 Dollars Right Now