The whole idea of investing is to use a portion of your money now to get more down the road. It is important for everyone to diversify their investments, and you might be thinking about buying a second house to do so. Investing in real estate is a goal that a lot of people have, but how can you get started? It was challenging enough to buy your first house, so how can you afford a second one?
Use A Cash-Out Refinance To Buy Your Second House
One trick that many people overlook is that they can actually conduct a cash-out refinance to purchase a second house. In general, your lender will allow you to cash out up to 80 percent of the value of your home during a cash-out refinance. This can give you a tremendous amount of flexibility that you can use to purchase a second house. For example, if your house is worth $300,000, you may be able to withdraw tens of thousands of dollars in equity.
What To Consider When Using A Cash-Out Refinance
When you apply for a cash-out refinance, there is a chance that the interest rate on your new loan might change. This might mean that you end up with a higher interest rate than before. You must make sure you can afford this new interest rate. Furthermore, you will be required to pay closing expenses. You need to have enough money set aside to cover those closing expenses. Keep in mind that the term of the loan might change as well. If you were close to paying off your house, this type of refinance might reset that clock. It might take you longer to pay off your mortgage than it did before. Consider these factors carefully before conducting a cash-out refinance.
A Cash-Out Refinance Might Be Right For You
In the end, a cash-out refinance could be a great way for you to withdraw equity from your home, using it to purchase an investment property. On the other hand, you need to ensure you can still afford the new loan after you take that equity out of your home. Work with an expert who can help you find the right option to meet your needs.
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About the Author:
Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.