I am investing in a condo with the home equity in my current home. My plan is to use the equity (140k) to acquire a 116k equity loan and get an additional 30k through an equity line of credit using two different lenders simultaneously. The equity loan has a 5.9% fixed rate, the line of credit has a 6.6% variable rate.
I’m going to use the equity line of credit for the 20% down payment to avoid paying PMI. Hopefully the lenders will not know about each others loans if done simulatneously because I’m going a little over what I have in home equity. It’s a little shady I guess but not illegal to my knowledge. Anyway, aside from that is this a good method of financing an investment property? Any recommendations at all?
Bud,
Without knowing the condo price and market, my only suggestion is don’t do it quite the way you plan. I believe simultaneous loans is also known as fraud. The odds on prosecution are low, but illegal is not a good way to start any endeavor.
Aside from that, using house equity is a great method of financing an investment property. I use equity from an older property as down-payment and closing costs on the next investment routinely. I would be a little leery of buying a condo instead of a house, but that is personal preference.
Good luck
Ray
Thanks Ray. I’m going to use just the equity loan to buy a condo and have money left over for a future purchase down payment using the remainder of the money. Another bonus with using the equity loan is no closing costs with my lender or PMI. I’d like to buy the condo because I will be out of town for the next couple of years and the maintenance worries are much less. If I were going to be here, I probably would buy a house. In the area I live. a very nice condo can be purchased for the same price you can purchase an old house in poor condition and bad neighborhood. It’s impossible to get positive cash flow in this area. Between the loan, taxes, insurance, and condo fee, you cannot break even. I’m investing for the long-term hoping the property values in this area will continue to rise. My primary residence value has almost doubled in 4 yrs. Any additional insight would be helpful. By the way, has anyone heard of a “future principal residence” loan? Is that a way to get around the higher interest rates on investment property? ???