Hello!
I am looking into purchasing a second (vacation) home and would love to hear your thought on the pros and cons of going a conventional 30-year second mortgage vs. using a HELOC or Home Equity Loan on my Primary Residence to purchase the second home outright. Here are the details:
Purchase Price: $300K
Down payment if taking mortgage: 10%
Available cash on hand: $40K
Equity in Primary Residence: $700K - $1M
Second Home will need $10K initial investment to freshen up for personal and STR use.
Assume equal rates for each product? Or does one product typically offer better rates?
I am thinking the Pros of the HELOC/HEL are a faster closing, perhaps a cash discount for the purchase, no PMI, lower rate/cheaper closing?, and keeping my $40K cash to invest in the property. Pros of the second mortgage are reducing the risk on my primary residence. Seems like a no brainer to me...What am I missing?
Thanks!
Sam
Hey I have been looking at similar loan products though I plan to really dive in when my work slows down in beg of March.
Obviously rates may differ than the rate sheet being advertised but just looking it appears the home equity and home equity loans are going to be more than a second mortgage or even a cash out refinance. Just as a comparison for using greater Cincinnati credit union they have at top tier credit score 6-7% on 7-12 year fixed rate loans, 9.5 on variable loans and 5.25-6% on 10-30 year loans.
From what Ive seen looking the home equity and heloc are similar if you get a fixed rate heloc if not your probably paying more in interest. My understanding is Heloc since its a line of credit can be drawn anytime so say you buy the property with and the ac goes on a heloc you could use that to pay for it where the home equity has a period/ gives all the cash upfront.
With how much equity you have in your primary if it was me I would think about doing a cash out refinance for the whole thing as rates would be lower. The time to close might be harder I would look at heloc. If your really needed it one could also consider hard money though that will come with higher rates and getting someone to give you 300k first time might be harder than just getting loan then you could refinance it later.
Since your a high net worth person I would also try talking to local/regional and even big bank lenders. They might be willing to give different terms especially to a high net worth person that they can likely make money on cross selling.
I dont see how the risk would be reduced on second mortgage unless you are planning to hold the property in some type of llc. Im no legal expert but belief if you get foreclosed on 2nd home and you still owe money they can come put lien/go after first house.
One thing to think about is when doing heloc on primary if you want to refinance you need to get their signoff as well as your primary loan which could cause complications.
Hey I have been looking at similar loan products though I plan to really dive in when my work slows down in beg of March.
Obviously rates may differ than the rate sheet being advertised but just looking it appears the home equity and home equity loans are going to be more than a second mortgage or even a cash out refinance. Just as a comparison for using greater Cincinnati credit union they have at top tier credit score 6-7% on 7-12 year fixed rate loans, 9.5 on variable loans and 5.25-6% on 10-30 year loans.
From what Ive seen looking the home equity and heloc are similar if you get a fixed rate heloc if not your probably paying more in interest. My understanding is Heloc since its a line of credit can be drawn anytime so say you buy the property with and the ac goes on a heloc you could use that to pay for it where the home equity has a period/ gives all the cash upfront.
With how much equity you have in your primary if it was me I would think about doing a cash out refinance for the whole thing as rates would be lower. The time to close might be harder I would look at heloc. If your really needed it one could also consider hard money though that will come with higher rates and getting someone to give you 300k first time might be harder than just getting loan then you could refinance it later.
Since your a high net worth person I would also try talking to local/regional and even big bank lenders. They might be willing to give different terms especially to a high net worth person that they can likely make money on cross selling.
I dont see how the risk would be reduced on second mortgage unless you are planning to hold the property in some type of llc. Im no legal expert but belief if you get foreclosed on 2nd home and you still owe money they can come put lien/go after first house.
One thing to think about is when doing heloc on primary if you want to refinance you need to get their signoff as well as your primary loan which could cause complications.
Hey I have been looking at similar loan products though I plan to really dive in when my work slows down in beg of March.
Obviously rates may differ than the rate sheet being advertised but just looking it appears the home equity and home equity loans are going to be more than a second mortgage or even a cash out refinance. Just as a comparison for using greater Cincinnati credit union they have at top tier credit score 6-7% on 7-12 year fixed rate loans, 9.5 on variable loans and 5.25-6% on 10-30 year loans.
From what Ive seen looking the home equity and heloc are similar if you get a fixed rate heloc if not your probably paying more in interest. My understanding is Heloc since its a line of credit can be drawn anytime so say you buy the property with and the ac goes on a heloc you could use that to pay for it where the home equity has a period/ gives all the cash upfront.
With how much equity you have in your primary if it was me I would think about doing a cash out refinance for the whole thing as rates would be lower. The time to close might be harder I would look at heloc. If your really needed it one could also consider hard money though that will come with higher rates and getting someone to give you 300k first time might be harder than just getting loan then you could refinance it later.
Since your a high net worth person I would also try talking to local/regional and even big bank lenders. They might be willing to give different terms especially to a high net worth person that they can likely make money on cross selling.
I dont see how the risk would be reduced on second mortgage unless you are planning to hold the property in some type of llc. Im no legal expert but belief if you get foreclosed on 2nd home and you still owe money they can come put lien/go after first house.
One thing to think about is when doing heloc on primary if you want to refinance you need to get their signoff as well as your primary loan which could cause complications.
Thanks for your thoughts! I have a 2.1% 20-year fixed on my primary residence so I would not consider a cash out refi. Where are you seeing the 30-year fixed rates at 5.25-6%? I don't see it advertised on GCCU. I can get prime-0.51% on a HELOC but I don't love the risk to my monthly payments if rates rise - that is why I like the fixed second mortgage option. Fixed Mortgage does come with closing costs and points upfront which the HELOC does not, except a $95 annual fee. Either way, I am hoping rates drop and can refinance in the next 5 years.
Hey I have been looking at similar loan products though I plan to really dive in when my work slows down in beg of March.
Obviously rates may differ than the rate sheet being advertised but just looking it appears the home equity and home equity loans are going to be more than a second mortgage or even a cash out refinance. Just as a comparison for using greater Cincinnati credit union they have at top tier credit score 6-7% on 7-12 year fixed rate loans, 9.5 on variable loans and 5.25-6% on 10-30 year loans.
From what Ive seen looking the home equity and heloc are similar if you get a fixed rate heloc if not your probably paying more in interest. My understanding is Heloc since its a line of credit can be drawn anytime so say you buy the property with and the ac goes on a heloc you could use that to pay for it where the home equity has a period/ gives all the cash upfront.
With how much equity you have in your primary if it was me I would think about doing a cash out refinance for the whole thing as rates would be lower. The time to close might be harder I would look at heloc. If your really needed it one could also consider hard money though that will come with higher rates and getting someone to give you 300k first time might be harder than just getting loan then you could refinance it later.
Since your a high net worth person I would also try talking to local/regional and even big bank lenders. They might be willing to give different terms especially to a high net worth person that they can likely make money on cross selling.
I dont see how the risk would be reduced on second mortgage unless you are planning to hold the property in some type of llc. Im no legal expert but belief if you get foreclosed on 2nd home and you still owe money they can come put lien/go after first house.
One thing to think about is when doing heloc on primary if you want to refinance you need to get their signoff as well as your primary loan which could cause complications.
Thanks for your thoughts! I have a 2.1% 20-year fixed on my primary residence so I would not consider a cash out refi. Where are you seeing the 30-year fixed rates at 5.25-6%? I don't see it advertised on GCCU. I can get prime-0.51% on a HELOC but I don't love the risk to my monthly payments if rates rise - that is why I like the fixed second mortgage option. Fixed Mortgage does come with closing costs and points upfront which the HELOC does not, except a $95 annual fee. Either way, I am hoping rates drop and can refinance in the next 5 years.
https://www.gccu.org/rates/
If you scroll down to home equity or first mortgages. I have no idea how real these rates are they dont have credit score just A+,B+ , C+ d and e and application fee is $400. When I emailed they just said to apply first, in end of February or in march I plan to go try and talk to someone to see if I can get better advice. However I think in general you would get lower rates going to credit unions than bigger banks though maybe you might get more if they think they can make the money up elsewhere.
That is a really low rate which is good so second or heloc would be better unless you didnt have the cash to get a second mortgage and the rate difference * cost of second home dont exceed the rate difference to your primary * principle left.
I would lean fixed heloc then you could always refinance if rates go down. Also if you do get a product from gcuu would appreciate if you let me know the rates/your credit score as like I said im a bit skeptical on their rate sheets.
Hey I have been looking at similar loan products though I plan to really dive in when my work slows down in beg of March.
Obviously rates may differ than the rate sheet being advertised but just looking it appears the home equity and home equity loans are going to be more than a second mortgage or even a cash out refinance. Just as a comparison for using greater Cincinnati credit union they have at top tier credit score 6-7% on 7-12 year fixed rate loans, 9.5 on variable loans and 5.25-6% on 10-30 year loans.
From what Ive seen looking the home equity and heloc are similar if you get a fixed rate heloc if not your probably paying more in interest. My understanding is Heloc since its a line of credit can be drawn anytime so say you buy the property with and the ac goes on a heloc you could use that to pay for it where the home equity has a period/ gives all the cash upfront.
With how much equity you have in your primary if it was me I would think about doing a cash out refinance for the whole thing as rates would be lower. The time to close might be harder I would look at heloc. If your really needed it one could also consider hard money though that will come with higher rates and getting someone to give you 300k first time might be harder than just getting loan then you could refinance it later.
Since your a high net worth person I would also try talking to local/regional and even big bank lenders. They might be willing to give different terms especially to a high net worth person that they can likely make money on cross selling.
I dont see how the risk would be reduced on second mortgage unless you are planning to hold the property in some type of llc. Im no legal expert but belief if you get foreclosed on 2nd home and you still owe money they can come put lien/go after first house.
One thing to think about is when doing heloc on primary if you want to refinance you need to get their signoff as well as your primary loan which could cause complications.
Thanks for your thoughts! I have a 2.1% 20-year fixed on my primary residence so I would not consider a cash out refi. Where are you seeing the 30-year fixed rates at 5.25-6%? I don't see it advertised on GCCU. I can get prime-0.51% on a HELOC but I don't love the risk to my monthly payments if rates rise - that is why I like the fixed second mortgage option. Fixed Mortgage does come with closing costs and points upfront which the HELOC does not, except a $95 annual fee. Either way, I am hoping rates drop and can refinance in the next 5 years.
https://www.gccu.org/rates/
If you scroll down to home equity or first mortgages. I have no idea how real these rates are they dont have credit score just A+,B+ , C+ d and e and application fee is $400. When I emailed they just said to apply first, in end of February or in march I plan to go try and talk to someone to see if I can get better advice. However I think in general you would get lower rates going to credit unions than bigger banks though maybe you might get more if they think they can make the money up elsewhere.
That is a really low rate which is good so second or heloc would be better unless you didnt have the cash to get a second mortgage and the rate difference * cost of second home dont exceed the rate difference to your primary * principle left.
I would lean fixed heloc then you could always refinance if rates go down. Also if you do get a product from gcuu would appreciate if you let me know the rates/your credit score as like I said im a bit skeptical on their rate sheets.
Skip the second home altogether. Its a mistake too many have made. Unless you have discovered some hidden jewel, the traditional second home locations have all turned stale.
And, I am sorry to tell you, you don't have enough money to consider a second home. If you had a couple million in equities and a need to diversify your holdings by adding real estate, maybe. Just maybe. But a person who has $40k in "available cash on hand" needs to hold on to it for a rainy day.
Skip the second home altogether. Its a mistake too many have made. Unless you have discovered some hidden jewel, the traditional second home locations have all turned stale.
And, I am sorry to tell you, you don't have enough money to consider a second home. If you had a couple million in equities and a need to diversify your holdings by adding real estate, maybe. Just maybe. But a person who has $40k in "available cash on hand" needs to hold on to it for a rainy day.
Thanks @Gregory Wilson for that sentiment. I tend to agree that we could be over leveraging ourselves and your comments are a good reality check but I did not paint the whole picture. A) The $40K cash on hand was not including my emergency fund and merely represented what I wanted to stick to as a low ~10% DP or to be used for a small refresh/reno. B) This is a hidden jewel to us. We have vacationed in this area for the last 9 years, infrastructure is building, and teardowns and renos are rampant. C) This is not a real estate holding but a generational investment in our family memories. We are budgeting for no rental cashflow so see upside if we can STR and additional upside when rates eventually and hopefully drop down for a refi.
Hello!
I am looking into purchasing a second (vacation) home and would love to hear your thought on the pros and cons of going a conventional 30-year second mortgage vs. using a HELOC or Home Equity Loan on my Primary Residence to purchase the second home outright. Here are the details:
Purchase Price: $300K
Down payment if taking mortgage: 10%
Available cash on hand: $40K
Equity in Primary Residence: $700K - $1M
Second Home will need $10K initial investment to freshen up for personal and STR use.
Assume equal rates for each product? Or does one product typically offer better rates?
I am thinking the Pros of the HELOC/HEL are a faster closing, perhaps a cash discount for the purchase, no PMI, lower rate/cheaper closing?, and keeping my $40K cash to invest in the property. Pros of the second mortgage are reducing the risk on my primary residence. Seems like a no brainer to me...What am I missing?
Thanks!
Sam