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Buying a Second Home Using
the Equity in
Your
First
Home |
You don’t have
to be a millionaire to buy a second home. Many
people rent a vacation home, when they
could easily use the equity in their
primary home to purchase a second home
of their own.
It’s simple:
After consulting with a tax attorney and a reputable
lender, you can take out a home equity loan to finance
your purchase of a second (or even third) home for your
family.
Usually, you can
take out a larger loan at a lower interest rate using
your primary residence (instead of financing the second
home without using the equity you’ve built up in home
#1).
Sometimes, home
owners refinance their primary residence for more than
what they owe – getting cash back to put a down payment
on their second home or even pay cash for the home
entirely.
You may even want
to shuffle things around and use the equity in your
first home to buy a second home – but then claim the
second home as your primary residence. If you
start acquiring more homes – a third, or even a fourth,
you may run into tax trouble, so be sure you consult a
tax attorney to help you set everything up in your best
interest.
If you own your
first home outright, then using the equity in it towards
purchasing a second home can be a great financial
strategy. But if you owe on the first home and use
the equity to buy a second home, you need to make sure
you can afford the added debt.
You don’t want to
wind up with three payments you can’t afford – one on
your original first home’s mortgage, a second for the
equity loan, and a third for the new property. If
you don’t own home #1 in full, at least make sure your
equity loan can purchase the second home without you
having to finance what’s left over after the down
payment.
© 2004 - All Rights Reserved. Apex Personal Loans
Store does not assume any responsibility for the
accuracy or completeness of the above article. Please
consult a financial advisor for specific advice
pertaining to your particular situation.
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