Newbie needs help to start please!!

13 Replies

Hi everyone! My name is Mai Holmquist. I'm from Fresno, CA. My husband and I own a home that we both live in for a couple years now. I want to use the equity of the house to help jump start my investing. Should I refinance the house or pull out an equity loan? 

Hey Mai,

I am actually in the same boat. My current mortgage rate is so low (3.35) that I didn't bother refinancing, I'm actually taking out a home equity loan. I'll pay off what's left of my mortgage, and use the rest for the purchase of my first rental property. Working on my guest bathroom now, so can't actually pull the money out until it's finished. 

Trust me, I'm a newbie too and this site, especially the webinars hosted by Brandon has taught me so much.

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@Mai Holmquist

Welcome to Bigger Pockets community. Be sure to check out “Learn” for all kinds of useful resources and free how to guides.

@Tish Boyd

Is the rate on your home mortgage 3.35% or is that the rate on your HE loan? If that is the rate of your mortgage, may I ask what rate you got on your equity loan?

@Mai Holmquist

Mai, there is an AskBP podcast that addresses the positives & negatives of HELOC's and equity loans. Maybe that will help you firm up your decision. I'm planning to take out a HELOC on my home for that reason, too. Good luck!

@Tish Boyd

 My interest rate on the house is already low too. Ill definitely look into getting an equity loan. Good luck on the guest bathroom! :)

@Mark Nolan

 Ill sure do that. Thank you

@Jeanie H.

 Those podcasts are very helpful. Ill look for the one you mentioned specifically. Thank you

@Mai Holmquist I live in San Jose and just did this over the past 9 Months and got 6 properties in Birmingham and Indianapolis.  Let me know if I can help. 

@Mai thanks and best of luck. I'll keep you posted and hope you do the same.

@Jeanie I'm still shopping around for one. I found a HE rate at 4.5 Capitol One and then I found a credit union, whose information I cannot locate for the life of me. I thought I had written down. 

Legal stuff first: I am a licensed Sr. Loan Originator NMLS# 1157855 and am currently licensed to originate in IN, OH, FL. If you are not in those states what I say may or may not apply to you. Please consult an advisor in your state. That being said when comparing a fixed rate first versus a second you should consider several factors. Is the second a line or loan? Do you need rinse and repeat functions? Is the interest rate fixed or variable? Investing against your primary home is a risky strategy and should be a last resort. When advising my borrowers I suggest they simply refinance unless they can secure an equity loan. You need to work your math on the total cost of the loan including closing costs, rate and APR. You need to consider how long you are keeping the primary home and the home you are buying. If you are flipping it would be a different conversation that if you are buying a rental. Further more it each of those has its own calculations you would need to do.

In short with the information provided it sounds to me like you are asking this question with out having an investment plan and strategy in place, nor have you completed cost analysis of the options and finally you have not sat down with professional advisers who can help you go over the numbers.

Rule number on of investing in anything is due your research after you have worked a plan backwords from your goals. You do this so you do not steer your research to a predetermined conclusion.

@Account Closed

 Send me a message, I'd like to discuss the details of your out of state properties as I am looking to do something similar and would like to hear how you manage/set everything up.

Thanks

@Mai Holmquist Which is the best way to go depends on how soon you think you can pay it off. Keep in mind that an equity line is going to be an adjustable rate whereas a refi mortgage can be fixed. HELOC's are what got a lot of people in trouble in 2008 when rates started shooting up.

Originally posted by @Tish Boyd :

@Jeanie I'm still shopping around for one. I found a HE rate at 4.5 Capitol One and then I found a credit union, whose information I cannot locate for the life of me. I thought I had written down. 

 The only reason I asked that question is because your mortgage rate is lower & you mentioned paying it off with the higher rate HEL. I assume you are doing that so you can bring your monthly payment down? Just be careful about over extending yourself in case a deal doesn't go as planned. I'd also be concerned about switching from a low fixed mortgage to a higher variable rate. The Fed is talking about raising the rates later this year. Be sure to keep some reserves to get you by in an emergency. Good luck!

Hey Jeanie,

Thanks, but not getting HEL, no way. No variable interest rate for me. Need the HE so that I can utilize the funds to invest in my first property. Sorry if I wasn't clear. There aren't any HE's that are as low as my current mortgage rate at all.

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