How soon can I borrow equity on our new home?

Question

We just bought a home a few days ago for $80K. But it appraised at $83K. So we have $3K in equity. How soon can we borrow that $3K? We'd love to borrow it now so we can use it to make improvements on the home (thus increasing our equity even more).
And even if we can, is it a good or bad idea to do that so soon?
Thanks!

Answer 1

This is a slippery slope. There are many many people who misuse home equity as they do their credit cards and end up selling their home with no equity value at all—just closing their mortgage and walking away with nothing. While your home may increase in value the cost of the next home is also growing. I use the same rule for home equity as I do for credit cards—if I can't see how I am going to pay what I borrow in short order, I don't touch it..

Answer 2

Point 1: Can you refinance? It isn't an idol question. Depending on your credit history and the state of the mortgage and real estate industry in your area, you may not be able to refinance. Banks & CU's are getting very picky -- turning down even relatively low risk borrowers in neighborhoods with poor resales and mid-risk borrowers who want to borrow more than 90%. Point 2: General Financial Advice 101 says you should never rollover credit card debt into home equity loans/refinancing unless your total credit card debt balance has been FALLING for 9 months to a year. If your total debt has not been falling for six months or more, the odds are you have not corrected the spending problems that caused the high credit debt in the first place. In 9 of 10 cases, the borrower uses up the equity in their home and runs the CC's right back up to the level before the roll over -- making the problem worse not better. Point 3: Look at the resales going on in your neighborhood. If prices have been going down for the past year and you see an increasing number of foreclosures or bankruptcies in your neighborhood, you are correct to fear that you will be under water soon after refinancing...

Answer 3

Bad idea for a few reasons With todays market you might not have 3k of equity, and not all improvements necessarily increase the worth of the home. Too many people have gotten themselves in trouble and are losing their homes because the treated the home like an ATM machine and have gotten over their heads in debt. Your better off treating you home as an investment and building up equity by paying down the mortgage, then you have some back up in the event of an emerency

Answer 4

You don't have equity, if you were to sell your house for 83 and still owed 80 you would be lucky to walk away with any money at all. Save your money for improvements. Wait until you have much more equity to even consider a HELOC or HEL They will probably only loan you up to about 80% of your homes value minus your first mortgage so if your home was worth 100 and you owed 80 you could borrow 10.

Answer 5

mortgage lenders normally look at the lower of the sales price versus the appraised value for the first year after you make your purchase (except for the state of NY where the law states the lender is to look at the appraised value if it is higher). BUT most lenders have a minimum line of credit of 10k if you are looking for a home equity loan.

Answer 6

No, i not would do that yet. You want to get a little base under your belt.

Wait until the mortage is down a little more.