is it worth mortgaging my primary residence.

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is it worth mortgaging my primary residence.

William Chrisman
Knoxville, TN · Member since 2013 · 29 posts · 2 votes

Quick and to the point!

I purchased my home last june with cash, a foreclosure for 54k its worth about 180k. I have one rental property with a mortgage that breaks even and only about 6k equity, I have a guest house on my property that I will be renting in the next six months once i finish the much needed repairs. I'm hungry for another rental property. Is it worth mortgaging my primary residence to get cash to purchase more properties? I really like not owing anything on my home but Im ready to find another property.

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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
13y

My answer would be debt service is cheap right now. Equity sitting in a property is dead equity losing value year after year due to inflation and not performing.

If you can most of that equity to work for much higher than borrowing costs plus get cash flow and tax write off then it's a no brainer to me.

Some people do not like carrying debt at all but to me there is good debt and bad debt. Not all debt is created equal.

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  • Eric W.
    Flipper/Rehabber · Lake Oswego, OR · Member since 2013 · 29 posts · 9 votes
    13y

    William Chrisman, I know this topic has been commented on quite a bit, but if I were you I would without question seriously look into your options of taking out a loan on your primary residence ONLY if you use it towards acquiring more real estate.

    The bottomline is if you can use that equity to buy another rental property that will provide enough cashflow that it will be greater than the payment of your new mortgage on your primary residence, that is a good thing in my opinion. Even if the difference only netted you $50 a month (I'm sure it would be more than that). Not only have you now increased your overall monthly income, you now have another property with another tenant paying down your loan for you. I am definitely a buy/hold type guy so when I see an opportunity to borrow for appox. 4% in order to earn 6-8% if not more, I'm all over it.

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  • Ben Hughes
    Investor · Cypress, TX · Member since 2013 · 403 posts · 59 votes
    13y
    Originally posted by Eric W.:
    William Chrisman, I know this topic has been commented on quite a bit, but if I were you I would without question seriously look into your options of taking out a loan on your primary residence ONLY if you use it towards acquiring more real estate.

    The bottomline is if you can use that equity to buy another rental property that will provide enough cashflow that it will be greater than the payment of your new mortgage on your primary residence, that is a good thing in my opinion. Even if the difference only netted you $50 a month (I'm sure it would be more than that). Not only have you now increased your overall monthly income, you now have another property with another tenant paying down your loan for you. I am definitely a buy/hold type guy so when I see an opportunity to borrow for appox. 4% in order to earn 6-8% if not more, I'm all over it.

    Exactly the way I think too Eric.

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  • William Chrisman
    OP
    Knoxville, TN · Member since 2013 · 29 posts · 2 votes
    13y

    Thanks everyone! I've got a lot to consider

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  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    12y

    @William Chrisman

    There is a school of finance that says:

    1. Your residence is not an investment

    2. You should own your residence outright with no mortgage.

    I agree with #1 but not #2.

    It is always easier to get a mortgage on your personal residence, that on an investment property.

    On your residence:

    1. The interest rate will be lower.

    2. The down payment will lower sometimes as low as 3 or 3.5%

    3. You can get 30 year fixed rate mortgages.

    And once you mortgage your personal residence, you can do what ever you want with the money include buy an investment property.

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