Borrow Equity for Your Next Down Payment
Borrow Equity for Your Next Down Payment
Coming up with a down payment for a house is out of reach for many investors in down markets. Conservative bank lenders want over 20 to 30 percent of a purchase price for a down payment—a lot of cash even for acquiring a modestly priced property.
One of the most practical creative financing solutions, when you don’t have that kind of cash, is to borrow equity on your existing property to leverage your new investment. By borrowing against your existing property value to put money down on your next deal, you can turn an undo-able deal into a done deal—and enjoy many advantages, as well.
When you borrow from your own home equity, you can enjoy lower interest rates, tax deductions and a speedy loan closing. Real estate investors who take advantage of substantial home equity and use it wisely to flip deals can create wealth.
Figure Your Equity and Know Your Budget
If you can borrow equity on your existing home for a down payment on a new house—and still have enough in your budget to finish fixing and flipping, or to leverage another investment strategy—then you will come out ahead.
Figuring your home equity value depends upon the current appraised market value of your house. Your equity is the portion of your appraised home value, which you own free and clear—after deducting any balance still owed in mortgages and loans. Your equity is the cash amount of your house, which you can access and borrow against.
A home’s current value is constantly changing in a volatile housing market. Here is where it pays to have a knowledgeable appraiser on your team who knows the variables occurring in the current housing market. Once your appraised home value is established, bankers and lenders typically lend 70 to 80 percent of the full market house value—minus what is owed on a first mortgage.
With enough home equity, you can take control of lender turndowns and turn your resources into down payments. Along with a well-planned budget for following through and managing your investment strategies, you are in business.
Take Financial Control of Your Equity
If you have substantial equity to borrow against, use a reliable appraiser who can establish the optimal value of your home. Watch your credit report to repair whatever credit history you can. A good credit score will expedite your loan and give you better home equity rates.
While home equity loans generally carry low rates, as with all loans, shop for the best rates and fees available. Consider presenting an investment business plan to your lender, along with your loan application. With good credit and good connections, you should be able to borrow equity quickly.
Once you secure your home equity, you can take advantage of tax deductions on mortgage payments and interest. Your equity, along with tax savings, adds up to a practical way to leverage investment opportunities and realize real returns on investment.
From Missed Deals to Equity Investments
Successful investors find opportunities even when they are cash poor. Your home equity can be an opportunity to turn missed deals into realized investments. Borrow equity, along with a sensible budget, to quickly turn new investments in to profitable returns.
• With substantial equity and a planned budget, you can leverage a new investment into a fix and flip or other investment strategies.
• Turn your home equity into your next down payment since lenders in slow housing markets want 20-30% down for new home loans.
• Your home equity is the portion of your appraised home value, which you own free and clear—after deducting loan balances still owed.
• Lenders typically lend 70 to 80 percent of the full market house value—minus what is owed on a first mortgage.
• Borrow equity from your home to enjoy lower interest rates, tax deductions and a speedy loan closing.
• It pays to have a good appraiser on your team to help establish the optimal estimate of your home’s current market value.
• Clean up your credit to ensure easy equity loans.
• Borrow equity to turn otherwise missed deals into new investments.
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