Utilizing Primary Homes Equity: Maximum Ratio?

[Richard Jenkins]

My primary residence is paid for and would like to use part of the equity to start investing in long-term SFH rentals. Would utilizing up to a maximum of 50% of the available equity be too much to take out for investing?

I thank you in advance for all your input and advise.

[David Sun]

It depends on your target rental property value. Usually, there is a DTI issue if you need to afford two mortgages. However, there is a program that can disregard DTI and the 10y ARM rate is at 6.75, much better than DSCR. The catch is that, for an investment property, the down payment needs 50%. So if your credit score is good, you can do a conventional cash-out refinancing of your primary residence, and then use the cash-out 50% equity (say 500k) to buy one or more investment properties (as long as the total value is below $1M). We can also do DSCR with as low as 20% down, which can also disregard the DTI issue, but the rate is higher. Feel free to pm me with your scenario in detail.