Is refinancing my personal house for a down payment?

Question

Chris Mason · Answer

Ya know, I made that superlaser comment on Star Wars day (May the 4th), and had my company name changed to Imperial Home Loans with the logo of the Galactic Empire, and a bunch of other things, and NOT A SINGLE PERSON caught the Star Wars easter eggs. :(

Lucero Sanchez · Answer

@Anthony Jackson

Hi Anthony, I suggest you do your numbers first before you give up on your idea.

First how much equity do you have in your primary residence, is it enough to put down for the apartment?

2nd how much will it increase your primary residence mortgage payment?

3rd will your new rental property cover your new mortgage amount or how much will it cover?

Do your numbers first then decide for yourself. Just like @Chris Mason said "A cash out refinance on a primary residence that has appreciated a bit can be a bit of a Superlaser towards getting you started, but it's not for everyone." but it might be for you.

We did a line of credit on our primary residence in 2007, we were able to take out $90k and we built a house and thanks to that LOC we are where we are now.

Good luck

Anthony Jackson · Answer

man I really thank you guys for your insight! It really has me thinking and was helpful @Shiloh Lundahl @Chris Mason @James Tebelman

Shiloh Lundahl · Answer

@Anthony Jackson Starting a business usually needs start up capital.  Lending your business money from a personal loan is something many people do when they start out.

Using debt to finance a business can work out great if you know what you are doing.  If you have a specific plan and if everything goes to plan.  But usually things don't go exactly to plan so having some one in your area to help mentor you through the process will likely lessen the expenses to your learning curve.

Good luck.

Chris Mason · Answer

It's not unusual to do.

It's not particularly conservative. A lot of very fiscally conservative people like to completely segregate their personal from their entrepreneurial financial lives, so they will only do cash out refinances on investment properties to buy other investment properties, but never their primary.

Ultimately it is up to you how aggressive you want to be with leverage. A cash out refinance on a primary residence that has appreciated a bit can be a bit of a Superlaser towards getting you started, but it's not for everyone.

Good luck!

James Tebelman · Answer

Personally, I wouldn't do that.  If your investment goes bad do you really want to end up being in deeper on your personal home at the same time?

Look for another way to finance the investment purchase and try to keep your personal home out of it.