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Updated over 2 years ago on . Most recent reply

User Stats

19
Posts
5
Votes
Ethan Kohler
  • New to Real Estate
  • Metro Detroit
5
Votes |
19
Posts

Potential Alternative to House Hacking?

Ethan Kohler
  • New to Real Estate
  • Metro Detroit
Posted

This would not be traditional house hacking, but maybe a cousin to it... I'm curious if many people have found success in moving to a new primary residence, but keeping their current house as a first rental property. Is it viable to take out a home equity loan on the original house to use as down payment for the new house? Of course, one wouldn't have the sale proceeds to use as down payment in this case. 

I purchased my current home in 2017, and have quite a decent interest rate and a fair amount of equity.  Maybe there are many specific details that would impact this, but would appreciate any insight into this strategy as whole. Additionally given current interest rates. 

Thanks All

  • Ethan Kohler
  • Most Popular Reply

    User Stats

    1,012
    Posts
    604
    Votes
    Brad Hammond
    • Real Estate Agent
    • Portland, OR
    604
    Votes |
    1,012
    Posts
    Brad Hammond
    • Real Estate Agent
    • Portland, OR
    Replied

    Hey @Ethan Kohler, on paper this is a great idea and it might work but there are a few things to look into before you get started. 

    1. What is the minimum amount of equity you need to have in the first property you are taking the HELOC on? 10%, 15%? Since you purchased it 5 years ago, you most likely have enough for a new 5% downpayment.

    2. For your second property, you are going to be financing 100% of the purchase price.  Make sure you are taking both loans into account when you are analyzing your properties.

    3. Make sure you know exactly what your first property will rent for by looking at local rental comps. 

    • Brad Hammond

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