Mortgage option decision

3 Replies

I am currently doing a seller finance with my parents. I bought their house as my primary residence. In my current market I believe I got 40k in equity off the top. I am looking into doing a HELOC to purchase an income property but I'm not sure if that's the best route or if I can even do that since I'm in an owners finance deal. I currently have a 5 year contract that i have to refi the home before it expires. A question i have is with the talks of mortgage rates going up in the near future do you think I should refi sooner rather than later or is there another more creative strategy out there?

My thinking is this. Back when interest rates were around 3.83% a $250,000 house mortgage monthly payment was around $420.90. Which translates to a house value of $281,841.00 Now at interest rates around 4.65% that same mortgage monthly payment jumps to $464.07 which translates to a house value of $263,142.00 So you see the effect of interest rates on house values? It lowers the number of potential buyers that can afford to purchase a house and the value of houses. And if as predicted interest rates rising to near 5% it will wipe out most gains of appreciation come over the next 12 months or so. I recommend financing now at the lower rates giving you more money to invest now rather than later which may lower the overall amount you would have to invest and costing you more.  Hopefully this is one good way to think about this. 

I believe that home rates ill continue to go up for how long unsure.  Try to do some due diligence and look at the trends for the last 30 years to find out what might happen.  In other words what is the highest interest rate?  what is the lowest?  Then use that to decide the ebb and flow and look where on that cycle we are and what it is likely to do. 

Originally posted by @David Hollenberger :
I am currently doing a seller finance with my parents. I bought their house as my primary residence. In my current market I believe I got 40k in equity off the top. I am looking into doing a HELOC to purchase an income property but I'm not sure if that's the best route or if I can even do that since I'm in an owners finance deal. I currently have a 5 year contract that i have to refi the home before it expires. A question i have is with the talks of mortgage rates going up in the near future do you think I should refi sooner rather than later or is there another more creative strategy out there?

 Mortgage rates have no where to go but up.  Lock in long term financing for as much as you can now.  Get a 2nd and get as high an ltv as you can.