Tapping Home Equity for financing investment property

Its  approach to acquire an investment property is to use your home equity through a home equity loan, home equity line of credit ( HELOC), or cash-out refinance. In most situations, you can borrow up to 80% of the equity worth of your house to put toward the purchase, rehab, and repair of an investment property.

Depending on the sort of loan you pick, using equity to finance a real estate investment has advantages and disadvantages. A HELOC, for example, allows you to borrow against your equity in the same way that a credit card does, and the monthly payments are generally interest-only. However, because the rate is frequently flexible, it can rise if the prime rate rises.A cash-out refinance will have a fixed rate, but it will likely lengthen the duration of your current loan. A longer loan term may result in higher interest payments on the primary residence. This would have to be balanced against the expected returns on an investment property.

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