3 Answers: How Invest in Real Estate Property by Leveraging Home Equity
I want to know how I can leverage my home equity to invest in rental properties? I would like to invest in real estate, borrowing against my house.
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Answers ( 3 )
You can get a line of credit to access some (probably not all) of your equity.
You would need to refinance your current property and then take some of the equity you have in the current property and borrow against it. So in other words if your house is worth 200k and you want to buy a rental property for say 150k. If you only owe the bank say a total of 120k on your primary home, you but the house is worth the 200 or more, you can refinance your home at say 150k and then you have the 20% to put down as the deposit on the rental
One of the most popular ways newbie real estate investors get started is through a Home Equity Line of Credit or HELOC. There are several key advantages to taking out a HELOC but a few of the key benefits are:
Immediate Access – Once approved, you can just write a check when you need the money for the amount you want.
Tax Deductible – You can write off the interest paid on the loan like you do with your primary mortgage.
Lower Interest Rate – You will often get very good rates on home equity loans as opposed to personal loans, hard money or credit card debt.
Can Continually Use – Once you pay it down, you can still continue to access the credit line over and over again.
Easy to Qualify – Requirements for borrowing against home equity vary by lender, but these standards are typical:
Equity in your home of at least 15% to 20% of its value, which is determined by an appraisal
Debt-to-income ratio of 43%, or possibly up to 50%
Credit score of 620 or higher
Strong history of paying your bills on time