Second Home - Down Payment
Hello everyone!
My husband and I are interested in purchasing a third property as a Second Home. Although we are willing to wait to make the purchase until we have the full 10% down, we would prefer not to.
We currently own two homes:
Investment (LTR) - we did a cash out refi at the end of last year.
Primary Residence - We went under contract in Sept. '21 and closed March '22, which gives us +/- $100,000 in equity. I am currently working to see if a HELOC is even a possibility with this property yet. I am thinking not likely, but I had to at least ask.
My husband does have a 401k, which we gave a quick look at pulling money from for a down payment, however the tax penalties would only provide us with a loss.
Taking a personal loan out could be an option. What other suggestions might you all have?
Thank you very much for your input and time.
<3 JD
If your house is under contract, a HELOC isn't an option. Borrowing a down payment isn't an option - you need to have vetted funds (in a bank/stock/investment account). You've already did a cash out refi on the other property so that's not an option. I recommend taking a loan from your 401k - A LOAN. Here's an article on it (please scroll down about mid-way on the page):
https://www.fidelity.com/viewp....
You'll avoid the tax consequences as long as you pay it back - and that buys you time to close on your current home to use those proceeds.
Do the research on the employer's plan to have a good understanding of the mechanics. Hope this helps.
Quote from @Patricia Steiner:
If your house is under contract, a HELOC isn't an option. Borrowing a down payment isn't an option - you need to have vetted funds (in a bank/stock/investment account). You've already did a cash out refi on the other property so that's not an option. I recommend taking a loan from your 401k - A LOAN. Here's an article on it (please scroll down about mid-way on the page):
https://www.fidelity.com/viewp....
You'll avoid the tax consequences as long as you pay it back - and that buys you time to close on your current home to use those proceeds.
Do the research on the employer's plan to have a good understanding of the mechanics. Hope this helps.
Thank you, Patricia! That was helpful :).
Just to clarify, my husband and I did close on our home in March of this year. Since it is "new construction" and we closed months after we wrote the contract, we currently have about $100,000 in equity. Which is why I was thinking a HELOC could be an option. However, even though $100k sounds like a lot, I think the margin is still too tight for us to be able to take advantage of any equity.
Hi @Jerika Demos, you could do a HELOC but you would have to wait 6 months from the purchase date. By then, you can access more equity if you so choose to invest in another property or do something else with it.
You could also borrow against your 401k. Then, in September, take a HELOC or second mortgage out to pay off the 401k debt. Essentially, you end up in the same position, just 4 months sooner.
Hope this helps! Let me know if I can be of any assistance.
@Andrew Garcia Thank you!