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Cashing out equity in a newly purchased home?

vicyankees
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vicyankees

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I have the option to purchase a home for roughly $100k below appraised value and currently own a home that I am considering renting. How can I go about purchasing this new home and using some of the equity to pay down my current mortgage in order to lower the cost and enable me to break even while I rent and wait out the market?

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September 13 2007 - US

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MelissWa
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MelissWa

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what is the purchase price of the home you have an option on and how much equity ($) do have in the home that you are considering renting?

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September 14 2007

vicyankees
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vicyankees

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Purchase price of new home would be $325-350k and the home I'm going to rent has limited equity, 5-10k.

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September 14 2007

RyanMenagh
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RyanMenagh

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I'm not entirely sure I know what you expect here. If the interest rates on your current mortgage and the new purchase are roughly the same, you are still going to be paying the same amount of loan payment. If you buy the new place and then either a) refinance to pull out the 100k equity or b) get a 100k home equity line, and then use the 100k to pay down your first mortgage, you are still paying interest and principal payments on the new 100k loan. It would basically be a wash.

However, what's more important here, IMO, is getting the right kind of loan on the new purchase. When you buy a second home or investment propery the rates are substantially higher than a primary residence. But, as long as you actually move into the new home you can get the primary residence rate and keep the mortgage terms on your first home the same--even if you rent it out.

If you do want to pull some money out of the new purchase for other things, I would reccommend waiting at least 90 days and then refinancing that new purchase. Keep in mind that rates are based on LTV (loan to value) than anything else so don't pull out more than 80% of the value to get the best rate as well as avoiding any mortgage insurance. In this case you could probably take out around 30k and still be under 80% LTV.

If you want to talk more about it,
email me at ryan@execmortinc.com
and if you're in Oregon, call me at 503-888-0809

Ryan Menagh

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September 15 2007

William Doom, "YourMortgagePlanner"
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William Doom, "YourMortgagePlanner"

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Purchase the new home as Owner Occupied, in order to secure the best rate. Make sure you have a rental agreement for your current residence in place, the majority of lenders do not look favorable upon buy and holds in the current market (buy and hold meaning buying a new home and holding your current). The new home will have to pass the lenders new home purchase hold standards: Larger home, more affluent neighborhood, closer to work, ect. The new market is vicious, gone are the days of Lassie fair underwriting standards, it back to the make sense standards, if you are not working with a knowledgeable Mortgage planner the deal could fall through, even if you have the 800 credit score full doc status.
Once you purchase your new home, depending on the LTV if you are 80% keep the first and take a second. Now depending on what you plan on doing with the equity there are two routes, a Home Equity Second or a Fixed second. You should also evaluate what type of mortgage your current residence is in, if you are in an ARM refinance into a fixed before you turn it into a rental, you will never obtain the fixed rate on a rental that you can on a owner occupied.
If you would like to discuss strategic mortgage options feel free to contact me.
I am license in majority of the sate in the U.S. and if I am not licensed in your state, I have an associate who is.
Will@MyEquityPro.com
1.888.271.3437 x 7

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September 15 2007

frank1003
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frank1003

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One big point is being missed here. There's no such thing as buying a home $100,000 under appraised value. As soon as you buy it, it is now worth what you paid for it. Effectively, you've driven down the value the date of closing, since a home is only worth what one is willing to pay for it. If you're the only viable purchaser and a seller discounts the home $100,000 to accept your offer, that says to me that the home is $100,000 overpriced, or at least that the existing appraisal was performed when the market was better and homes were actually selling for top dollar. Remember, values in many areas have FALLEN and the old appraisal may not be worth the ink and paper it was written with in today's market. Secondly, lenders will use the purchase price for a minimum of 6 months for the purpose of a refinance transaction, so there will be no equity available to cash out until at least that much time goes by. Afterword, you'd better hope that homes in the area begin to appreciate and sell once again so your value begins to rebound upward from your purchase price. Another seller or two in the area that deep discounts their properties in order to move them would mean that your value will stagnate for a while. There's no longer any "quick flips" or "instant equity" scenarios out there like there once was. In a sellers market (yesterday), equity grows rapidly. In a buyer's market (today), equity grows over time.

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September 15 2007

Kasper
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Kasper

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Will $100,000 under appraised value still be a good buy? Not to sure of that, realtors are starting to push this deeply discounted ?under appraised value? rubbish. There is no way to determine if that 100,000 under appraised value will turn to 150,000 over valued in a couple months, be careful we are in a scary time to be buying real-estate

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September 15 2007

RyanMenagh
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RyanMenagh

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Alright, "My Equity Pro" above, you are an idiot. Didn't you read my post before you posted on this thread??? Pretty much ripped off everything I said.

Frank1003 and Kasper, are you even qualified to be giving advice here? When's the last time you checked bank guidelines that wasn't Countrywide or Homecomings? Don't worry Vicyankees, if you get a steal on this house for $100k below value there are plenty of banks that will line up to let you cash the equity out of it. You don't have to wait "6 months" like some newb said above. Appraisers are held to a very high standard and responsibility in my neck of the woods and if they base their appraisal on recent market data comparables and such, you know your house is worth what they say. You could always buy and then sell right away too to make the 100k that way.

Yes, this is a risky market right now but if you trust your instincts and depending on how you know the house is $100k under-priced, I'd buy it.

Ryan, A real Mortgage Broker.....

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September 20 2007

Nic Netherton, "ColoradoLender"
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Nic Netherton, "ColoradoLender"

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Im a real mortgage broker too.....

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September 20 2007

frank1003
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frank1003

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Ryan, "advice" like yours is what puts people in the poor house. Banks will be standing in line to let you cash out equity??? Sell immediately for a quick $100k profit??? Are you serious? This is 2007, not 2004 and if you think it's that easy, you obviously haven't written a loan in the last few months. The only truth in your statement is that appraisers are held to a very high standard and that the basis for the appraisal is recent market data comps, which in many cases happen to be LOWER than they have been in recent history. Incidentally, especially after reading your comments, my only response to your questioning my qualifications is to say that the question should be posed to you. You have just exposed yourself as an inexperienced, irresponsible fool and the type of individual that has contributed to creating the problems surfacing in the mortgage and real estate business today.

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September 21 2007

RyanMenagh
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I'm not sure why people want to use these forums as venues to argue. You are well entitled to your opinion, as I am entitled to mine. I'm not going to explain myself to you, frank1003. My claims are leaving out some details, however they are perfectly valid. The funny thing is that the person who posed this question is not even reading this thread anymore.

I can assure you I take the financial well being of my clients very seriously. I have sold nothing but 30 year fixed mortgages to all of my clients and I have always done so with zero ysp. That's right, at par, because that's what I believe in. I doubt you can say the same. Regardless, I feel your accusations are unwarranted. Anyway, I don't appreciate the slander.

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September 23 2007

househelp
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househelp

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Consider an entirely different approach: NO REFINANCING & NO ADD'L COST OF LIVING!

Why not utilize an "Interest Cancellation" program. It works like this: Using it on your current home which you wish to rent for profit, you could payoff 100% of your mortgage in 1/3, 1/2 or less time, gaining equity as you do, while lowering both your principal and interest dramatically. As paid off your rent profit grows to 100% (minus expenses) and you transfer the program to the new property you want to purchase, using the rent profit along with your normal payments to pay it off even faster!

CONSIDER: A $200,000 mortgage at 6% for 30 years = $231,577 INTEREST! If, just for example, you paid a onetime $5,000 extra principal-only payment at the beginning of that loan, you would save $23,303 in interest. That equates to a 466% return on investment! Paying off your home is the absolute best and safest investment.

And... what if you could do that with NO REFINANCING, NO MONEY OUT OF POCKET, NO ADDITIONAL PAYMENTS OR ALTERATION TO YOUR LIFESTYLE?

OUR PERSONAL EXPERIENCE

FORMER HOME Reduced from: 28.2 yrs (remaining) to: 5.8 yrs + $286,046.17 savings Guaranteed minimum savings!
When we sold, only 4 months after beginning the program, we received thou$and$ we otherwise would not have received!

CURRENT HOME Reduced from: 30 Years (new loan) to: 9.4 yrs + $406,398.72 Guaranteed minimum savings!
With the program we can VIEW our financial status anytime, and know exactly when we become Debt-Free!

Its like having a GPS, speedometer, gas and temperature gauge, and powerful headlights all tied into your personal financial life to know where you are, where you are going, how fast or slow, and how and when you will get there, all-in-one. Actually more!

Learn more and get a free analysis to see how much in time and dollars you would be guaranteed to save, minimally. Go to: u1stfinancial.net/payitoff

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September 24 2007

frank1003
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Ryan, one thing I've learned over the past 25+ years in this business is that a great deal of people in this profession are usually very passionate about their beliefs and methods. My "accusations" toward you were as unwarranted as your "accusations" were toward me. We both pulled that trigger, if you review the thread! I believe we were both just being passionate about our beliefs and if it was taken any other way, I apologize. We need to realize that this isn't an advice column here, it's a discussion forum for the purpose of sharing ideas. Further, since financial advice is highly unique to each and every individual seeking it, I'd hope that anyone that poses questions realizes that and they seek tailor made advice from one or more of any of the professionals out there willing to give it rather than taking any of the discussions on this board as gospel.

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October 01 2007

Vincent Towne, "Countrywide2008"
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Vincent Towne, "Countrywide2008"

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I'm assuming that vickyankees is purchasing a property that is 100% owned by the seller, perhaps a relative, and is selling the property below market value as a gift or perhaps to pay back a debt, whatever the reason VICKYANYEES, go ahead with your transaction but make sure you charge enough in rent 2.5 times your mortgage on the home. As far as removing the equity of out the home, my company looks at this on a case by case basis. It can be done.

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October 07 2007

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Cashing out equity in a newly purchased home?

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