HELP! Buying 2nd home with 1st home equity?

Question

Hi everyone,

I am very new with real estate, I purchase my first house in 2016 for $440,000 (CAD) with $220,000 downpayment and the loan is 30 yrs so I pay approx $1,100/month. I fixed it up and it worths around $600,000 and now I am renting it out for $2,450/m.

I am planning to buy a second home in 2020 with around $450,000 in price. I am wondering is there any advise/method that I can do to get money from my first house to by another one as a downpayment?

Really need some help here since I don't have much knowledge about how loan/equity.

Thank you very much for spending time helping me,

Minh

Nicholas Lohr · Answer

yeah it's called the "BRRRR" method.  Just search that on this site and you'll get a ton of info and examples.

According to your numbers you'll most likely get around a 420,000 loan from a new bank against your first property, assuming you want to take 70% of the value, you could always take less if you want.  70% is a pretty common amount though.

(600,000 * .7 = 420,000)

Then you take that 420,000 that the new bank loans you and pay off the first loan which you still owe say 205,000 on?  (this is my guess that you still owe about that)

420,000 - 205,000 = 215,000 left over  (again this is a rough number as there will be closing costs etc)

then you can use that 215,000 towards your new 450,000 house.  The 215,000 will be way more than enough for that actually. Maybe buy 2 houses or a small apartment building?!  Depending on your location that could be enough.