A question for mortgage brokers regarding home equity?

Question

I own a condo. Can I take out a home equity loan on that condo to make the down payment on a new property? If so, what happens when I sell the condo? Since at that point I believe I have to pay off that home equity loan, can I then take out a home equity loan on the new property to pay that off? I just figure since I already own, I should utilize that as much as possible. Also, how much does my credit score play into that? Thanks

I should clarify that I still have a mortgage on the condo, but I did put 20% down when I purchased it. My intention is to rent the condo out, so that will cover that monthly mortgage payment.

Answer 1

Sure you can take out equity lines to buy other properties, but there are various restrictions that will hold you back. First off you can usually only get about 80% of the appraised value of the place where you are taking out the line. You could probably get a new mortgage that goes to 100% but you'll have to pay lots of fees to refinance and also need to pay PMI. Also, typically the bank will make you wait a few years (2 I think) until you can take out equity above your purchase price, even if the place appraises for more (ie you bought the place for 300k 1 year ago, loan is 200K, it appraises for 400K - bank will let you borrow 80% of the 300K or refinance based on the 300K number, not based on the 400K - since you have owned the palce less than 2 yrs).

So, in general you can do this but the bank will limit this. They limit this to reduce their exposure and because they've been burned by bad appraisals in the past.

Best luck.

Answer 2

Can I take out a home equity loan on that condo to make the down payment on a new property?
Yes, if you have enough equity in the condo and good credit standing and ample income to make two morgtage payments and a loan payment.

If so, what happens when I sell the condo?
The loan amount is deducted from your proceeds of the sale.

can I then take out a home equity loan on the new property to pay that off?
What? To pay off the loan on the condo? See above.

You probably won't have any equity in the new home, YET. Unless you make a substantial down payment. WHY would you need a loan on the new property?

Will affect your credit score if you have a loan and two morgtages.

Answer 3

A home equity loan is a mortgage just like any other. When you sell the property, it has to be paid off in total. There are plenty of lenders that will lend up to 100% of your home's value, when taking your existing first mortgage and your new second mortgage into consideration - but credit scores are exceptionally important.

When you think about it, second mortgages are a secured loan - because as indicated above you can't move without paying them off, and you can't refinance unless you pay them off or resubordinate them. BUT, if there is a default the first mortgage is the one that's going to get paid (to some degree) and the second mortgage is going to get discharged. So second mortgages take a person's credit score very much into account.

You shouldn't need to tell anyone that your purpose in taking out the loan is to use it as a down payment on a new purchase. So, if the scores are there and you want to tap into that equity, then that's the way you do it.

Best of luck and let me know if I can help in any way. Yep, one of those broker guys. :)

Answer 4

yes you can take out equity to do so. Your credit score means everything in this. The higher the better. The other thing you need to look at is a bank approving you to afford both properties at the same time. I am a mortgage broker and by the questions you are asking please make sure you talk to somebody that gives you all your options and explains in detail what you are getting into. If you would like to talk further email me. I am only licensed in CT and Fl but if you are outside those areas i would be happy to answer more questions for you.

Answer 5

You are on the right track. Your credit score is the number one driving factor in what you can get approved for. Check to see what you can qualify for on the purchase of the new home, and you may possibl y qualify to get 100% financing, as long as the payment is reasonable for you... Otherwise you can do what you are describing.

Answer 6

i could examine with your contemporary lender first. because of the fact they are your contemporary servicer, the expenditures could be extra powerful than maximum. Now, right here is the huge question...are you going to be waiting to qualify for a good bigger living house own loan without your mom being a non-occupying co-signer? Did you commit fraud on your contemporary own loan and checklist her as residing with you? as quickly as you talk with your contemporary lender, touch different companies, which contain banks and brokers and shop for the terrific own loan.