Refinancing or Home Equity Loan

[Alex Blaise]

I am in the middle of closing on my first piece of real estate ever! It is a duplex which I got for $140k. One side is rented out for $750 a month (a little under market value) the other side me and my wife will be moving into once we fix it up. We are putting $100k down on the property and only financing $40k of it. There is another duplex that I have run the number on and would like to buy. What is the best way to go about pulling from the $100k in equity in the first property for a down payment on the next property? Once we fix our side up and move in the property should be worth $200k-$250k (it was very undervalued at time of purchase).

[Carlos Valencia]

Hi Alex, 

Well if the numbers you share are in your favor and you can manage get 90% of the LTV from your home then Heloc would be a great option. The downside with Heloc is that the rates are in the 12-14 and its not fixed as they are adjustable like a credit card. Still cheaper than using a credit card tho. To be conservative lets ay your property is valued at 200k X 90% LTV = 180k -40k you owe = 140k That's a nice Heloc line to help you invest in your next property. Another benefit of a Heloc is that you don't touch your current mortgage on your primary and get to keep your current rate. I would say cash out refi if the rate is better than your current and it makes sense but if the rate is higher when you refi then go Heloc route. Make sure to go over the pros and cons of each t make an educated decision. Real estate can be emotional and you want to make sure you keep emotions out as much as possible so you can think clearly about your options. By the way what market are you in as those prices are very low.

@Albert Bui @Matthew Kwan @Kin Meng Sio