What is the best in this economy

Pay larger amount to get more Equity in existing house or save more cash money so I can use that as downpayment for a new investment home/ rental home/ etc etc… thus paying lesser if it remains vacant during slow days. Current 2nd line of home equity is 8.125, is that too high?. anyone ? Say you buy an invesment [rehab, rental, etc). Can one get multiple approvals from several mortgage companies?

Linden these are good, common questions. Before providing a good answer one would need to know the following:

  • Location
  • More specific statement of the goal or strategy here
  • Cash flow/dollar cost analysis (how many properties and how much tied up in them, profitable or not?)
  • Credit Standing

I have been pitching 25, 20 and 15 year fixed notes for my applicants whose affordability index allows it, whether the income is declared or not. But this is for owner occupied primary residences in most locations. Again, regionally speaking, the strategy may differ, especially pending property occupancy level, type and term.

Oh, and in answer to the rate on your HELOC, no, that’s not high, Linden, you’re only paying prime plus 1/8 which is pretty standard. And yes, you can get multiple approvals from multiple lenders. Just be wary of numerous credit pulls all at once while you’re rate shopping!

why not pay down your heloc to save on interest. you can draw the money when you need it for a down payment anyway

Always put as little down as possible. Then, why not finance your investment with a 5-yr Option ARM at 1.25%? It opens all kinds of doors for the small investor.

Da Wiz

FYI, some lenders will not allow you to borrow on a home equity loan directly for the purpose of a down payment. Some will, but have your broker research this up front. If the lender will not allow it, you just would need to take the money out at least 60-90 days before closing and let it season in your bank account. Wil817 has a good point- since you can borrow against it anyway, you could pay down the home equity loan and save on interest. 8.125% is not bad at all in today’s marketplace.