Second Mortage/ HELOC to buy an Investment Property?

[Chris Smith]

Hi guys! Hoping for help understanding the best way to finance a property I'm interested in. Obviously I want to reduce my cost of financing, and with Investor loans even more expensive I'm looking for other options. Would a second mortgage/HELOC on my primary be an option and then make an all cash offer? My house is worth ~$650k and I owe $200k on it. Also, I have another property (Condo, paid off, worth ~$300k, rented to the same tenants for 9yrs) that I'd borrow against as well. Any help would be greatly appreciated! Chris

[Ashley Noethe]

Yes! Definitely recommend tapping into that equity to build your investment portfolio! We've done it two ways -- a cash out refinance and a HELOC. You'd just have to run the numbers to see what makes the most sense. The cash out refinance is nice since then you just have one payment. The HELOC can be nice since once you pay that off you eliminate that payment, and you also have that line of credit available to use again without needing to do any other refinancing. I'd recommend connecting with a lender local to you who can crunch the numbers for you. There is also the interest rate factor these days. We did a cash out refinance for a down payment on a 5-plex .. but that was also a different situation where the refinance actually ended up being a lower rate than what our initial mortgage loan was .. I assume that likely wouldn't be the case now. When we used a HELOC for a down payment - the HELOC monthly payment was high and eating a lot of our profit so we actually ended up refinancing it back into our house. Again, just depends how the numbers work out. In a nutshell though, yes a second mortgage (in my opinion and experience) is a great way to finance an investment property when you have excess equity in your primary residence.