Questions about renting out my current home, and getting another mortgage on a second home.

[Tim Hoskins]

I have done a lot of research about this, and what I know isn't a lot.

I know I can't have more than one FHA loan at a time and I have to live in the FHA loaned home. I currently have an FHA loan on my home. My interest rate is fixed at 4.25%. Could I transfer the mortgage to a different type of loan and still get this interest rate?

I know the interest rate for an investment property is normally 6%. Does this affect my interest and mortgage interest as well?

Can I use the equity in my current home as a down payment or collateral for another property?

Any other advice would be appreciated as I am very new and renting out my current home will be my first real estate deal.

Thanks

[Jon Holdman]

You could refi your existing house. You can likely do better than 4.25% right now, though rates fluctuate frequently. Current rates are closer to 3.5%.

You should be able to do MUCH better than 6% for an investment loan. Maybe half to one point above OO rates. Unless you're talking about an apartment building or some such.

If you buy another house for a residence and keep the old one, keep in mind that you will need to qualify for both loans. Any potential rental income won't be counted toward qualification.

If you take out a HELOC on the current house, just do the math on how that effects your cash flow.

Don't fall for the "cash flow = rent - mortgage payment" myth. Most houses make crummy rentals because the price (payment, really) is too big compared to the rent. Knowing nothing else, I'd guess that's the case for yours. Give us some numbers.