daveyrh
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| Saving for a house |
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I currently live rent free in company housing and would like to buy or build a house in about 3 years. I bought a duplex that is rented out with good renters six months ago and have been making triple payments on my mortgage(two to principle). Should I be doing something different to save for a house or can I pull the equity out of the duplex for my down payment? The duplex is cashflowing so I think it would be foolish to sell it. Any advise would be helpful
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Tue Nov 02, 2004 12:53 am |
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xboxundone
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| Re: Saving for a house |
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quote:
Originally posted by daveyrh
I currently live rent free in company housing and would like to buy or build a house in about 3 years. I bought a duplex that is rented out with good renters six months ago and have been making triple payments on my mortgage(two to principle). Should I be doing something different to save for a house or can I pull the equity out of the duplex for my down payment? The duplex is cashflowing so I think it would be foolish to sell it. Any advise would be helpful
First off congrats on living rent free  . I woudl say you need to keep making extra payments, but in the same process stashing some for a down payment/ any renovations or new furniture etc.. you will need once you get this house a few years out. You could pull the equity out of the Duplex to help with down payment. You are fortunate as you have several options... I am not a real estate guru so i will leave bulk of advice to others... but sounds like you are on great start to wealth building.
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Tue Nov 02, 2004 1:17 am |
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BlankenshipFP
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Consider your options - if your mortgage rate on the rental property is pretty low (5-6% range), you should put some (or most) of the money that you're currently putting toward the mortgage into a savings vehicle, in order to have the ready cash for a down payment when the time comes to purchase the house, as xboxundone says.
Since your home purchase is moderately short term, I would stay pretty conservative with your savings vehicle. Look around and find a higher-yielding money market account, or perhaps CD's maturing within the timeframe you're looking at for purchase.
Assuming that you'll keep the duplex when you purchase the home, this strategy allows you to stretch out the time that you have the money borrowed at this low rate, thereby making the most of your leverage.
Good luck!
Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Tue Nov 02, 2004 12:45 pm |
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BlankenshipFP
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Just to clarify what I said in the earlier post:
In the three-year timespan that you are looking at for purchasing or building a home, the difference between socking money away in a savings account vs. putting it toward your mortgage on the rental is pretty much a wash.
Where the benefit comes in is when you are ready to make your purchase. Instead of having to borrow the equity from your rental property at a potentially higher rate than today, you will have the cash on hand. Plus, you'll still have that loan on the rental property, generating cash, and costing you very little (in terms of the cost of the loan).
Hope this helps -
Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Thu Nov 04, 2004 3:53 pm |
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Andrew
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Having cash on hand for closing costs and moving expenses sure is a nice thing when buying a new house. When you are low on funds you can do various tricks to roll some of your closing costs into your loan, but this costs more in the long run.
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Thu Nov 04, 2004 5:08 pm |
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daveyrh
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| Rental Property |
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If I have 60-70k in equity on the rental at the time I want to purchase a house, how much could I pull out in a home equity loan? What kind of rate would I be looking at based on today's rates? The original loan for the duplex was for 115k and I owe 80k on it. I want to build or buy a house for around 200-220k including property.
Any advise would be helpful.
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Thu Nov 04, 2004 6:30 pm |
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xboxundone
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www.bankrate.com has a good listing of the going rates for home loans or another good site is www.compareinterestrates.com
as it does it by state
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Thu Nov 04, 2004 6:58 pm |
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BlankenshipFP
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From a quick review of bankrate.com, it appears that today, a 50k home equity loan can be had for a premium of approximately 1%. That spread may increase with an increase in overall rates.
Hope this helps.
Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Thu Nov 04, 2004 7:01 pm |
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