Posted on: 03-05-14 17:27:13
Can some one explain me in simple terms how this scenario would work.
- You bought your house for 300K about 5 years back.
- Currently appraised value is 500K.
- Mortgage balance is 150K.
- Roughly you would have about 300K as equity.
Now you want to buy another house for 650K, you don't have any money for down payment.
And you want to put a down payment of 250K. Without selling the first house, how could you buy the second house, say your intention is to put the first house on rental.
What are the options other than (i) Selling the house (ii) HELOC.
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The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
Quote:
Originally posted by JRF
Can some one explain me in simple terms how this scenario would work.
- You bought your house for 300K about 5 years back.
- Currently appraised value is 500K.
- Mortgage balance is 150K.
- Roughly you would have about 300K as equity.
Now you want to buy another house for 650K, you don't have any money for down payment.
And you want to put a down payment of 250K. Without selling the first house, how could you buy the second house, say your intention is to put the first house on rental.
What are the options other than (i) Selling the house (ii) HELOC.
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Approach the institution that is currently holding your mortgage and make a plea for a release of a sum of $250k from the fixed asset. Also make sure it is at the current rates.
The facts that are in your favour are...:
1) The good appreciation of the property.*
2) The fact that the mortgage has been reduced considerably with your additional payments into it. (a sum of 150K)
3) The stability of your job with the current employer.(If self employed, then, the business projections, you can provide them with your business plan.)
*There are R.E.Agents who will provide you with a Free Appraisal. See if they will accept it at the face value.
Also there are qualified Appraisers who will back your claim for the capital appreciation of the property and provide you with their evaluation for the release of the additional 250K. The rate for the new loan amount might go up a little based upon the market condition. If you are into heloc, you do have a little leeway there in the bargaining for the rates for the additional amount.
Once the property gets into the rental mode, the lender has the right to charge you a different rate for that loan. Because it is a business loan. The insurance on the property might go down a shade. You will have to request the renter to take additional renters insurance.
There are Brokers who will provide you with a Second Mortgage for the amount you currently need. Also there are Private Lenders, who will extend that sum based on the current equity in that fixed asset.
You will also need another mortgage for the new acquisition on the balance of the purchase, plus funds for other costs and sundry expenses.
If it is a NEW build, then, there may be bankers the builder might have, who can extend the required sum at a low rate of interest. Some builders have that clout. Check with them first.
Please note that the feds have started to drop CMHC mortgage insurance for those who are into rentals. Please check with the Mortgage broker for this.
Congratulations and Happy house warming.
FH.
On what day are you going to hang that white gourd.
Hi JRF,
The maximum equity take out will be 200K. So you would refinance the first home for 350K. Put the 200K towards the new home. You will be under the 80% LTV in both cases so you don't have to worry about insurance premiums. So if income, credit score, and debt ratio are good you should not have a problem. Remember you will be carrying two mortgages. If you have a renter commitment you will be able to use the rent as income. Hope this helps.
Ayube
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Thanks for the information. Refinancing looks like a good option.
The housing market seem to be hot, I need to explore my options.
-----------------------------------------------------------------
The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
