Re: Financing a second property - Posted by RJ Baxter
Posted by RJ Baxter on November 02, 2005 at 15:39:14:
Many lenders have the same rates on second homes as on primary residences, so you could finance it and get the same terms as if you occupied the home.
You will get the best mortgage terms with 20% down, so I would suggest taking a home equity loan on your primary for 20% of the purchase price of $165,000. I don’t feel it is best to do a 2nd for the entire purchase price ($165K) because the rates on 2nd mortgages are worse in general than 1st mortgages.
So, take the 2nd on your current home ($33K), use the money for the down payment, and take out an 80% ($132K) 1st mortgage on the second home in order to obtain the best terms on both. That’s how I would structure it if I was in your shoes.
Also, on the 2nd, if possible, steer away from a HELOC (home equity line of credit) because these are monthly adjustables tied to prime and prime rate is definitely going to continue to go up as long as inflation sticks around, so your rate will go up if you take a HELOC.