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Questions regarding buying second home

I currently own a house in CA worth $650K with an outstanding loan of $424K.  Due to an inheritance, I now have money to pay off my outstanding loan.  I am seriously considering renting out the property and purchasing a second home.

My first question is would it be better to pay off my mortgage on the original home and take out a mortgage on the home I am considering.  Or would it be better to use the money to buy the new home and keep my current mortgage and pay cash for the new home?
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August 16 2012 - San Diego
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My first suggestion is not to tell people you have money. As soon as people know you have some money they will start knocking on your door with the best investments opportunities ever.

Second, decide whether you like your current house or not. 

If you like your house, then refinance to get a lower interest rate, and buy multifamily properties. You will have less vacancy, less property taxes per square feet, and higher cash flow.

If you don't want to live there anymore, then refinance before moving out so you get owner occupied rate, and then buy another house. 

I always work this situation on a spreadsheet, when I can play with the rates, prices, commissions, title fees, etc.

Thanks.
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August 20 2012
What is the current interest rate on your loan and what is the payment?
How much can you rent out the house for?

How much are you going to finance with your new purchase?  

Get the answers to those questions and run the numbers.   You might be better off financing both properties.   You might be better off refinancing your current property to a lower interest rate and paying down the balance so it cash flows better.  

Good luck good problems to have!
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August 20 2012
This question will best be answered by a lender,  who can look at your full financial profile and see what makes more sense for you.  Then also have a word with your accountant and see how the numbers will play.  Good lucdk! 
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August 17 2012
Mortgage rates are at an all time low, and in most areas including your own, renting is more expensive than homeowning. We recommend refinancing and paying off your first home and purchasing a second.
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August 16 2012
Hello user2294070!

I suspect you are too young for "Depends"...hehe. But on a more serious nnote, it does depend on several factors. With rates this low, financing has never been "cheaper". As Real Estate Agents, we have all alligned ourselves with the best Lenders in our industry. If you would like a couple of great contacts, we can provide referrals.A great Loan Officer will help direct you towards your best scenario and provide all of your options. It is such a great time to move up to a Dream Home, they are so affordable now in San Diego...but prices are now going back up, as we move through a housing shortage, related to the halt in building new homes for the last 5 years. Let me know if you want any Lender referrals. You are in a very fortunate position compared to most people. Timing is everything, and now is a great time for your next expertly calculated real estate purchase!

All the BEST!

Chris Gorno
DRE # 01499885
Windermere Real Estate SoCAL
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August 16 2012
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I apologize for leaving out needed information.  Our current interest rate is 4.875 on 30 year fixed.  Current credit score is mid 700 and income 130K.  I am not sure if we can count any income we would get from the rental of our current home.  Right now properties in the neighborhood rent between $3300 - $4000/month.
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August 16 2012
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The answer to your questions is the classic, "it depends."  It depends on your credit score, your credit record, income, interest rate you are paying now, purchase price of the home you want to buy...

Your best bet is to select a loan consultant who you trust and feel comfortable working with.  Have them run your credit and provide them with the specifics of your situation. They can work up the numbers and you will be able to determine your best course of action.
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August 16 2012
The question depends on where you are looking to buy the investment property and what return you can expect. You would want to make the decision based upon how you could best put the money to work and what you are most comfortable with, whether it be in real estate, the market, or in paying down your existing mortgage. Best regards! Jessica Foote
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August 16 2012
Good Afternoon!
It really depends on a lot of variables in your situation, like your current interest rate etc. Feel free to contact me directly and we can go over the particulars...

Thanks!
Sinead McAllister
Broker
McAllister Homes Real Estate
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August 16 2012
 
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