Using Equity From my Home to Buy an Investment Property

Are you thinking about buying an investment property but don't think you can afford it? Have you always wanted to try being a landlord, but you aren't looking for a property to buy because you don't have the downpayment? Well, there may be another solution for you.

If you own your own home, it is possible that you can buy an investment property with no money down. Here's one option that may be available to you, the homeowner.

Did you know that you are able to mortgage your home for up to 75% of its appraised value? If your existing mortgage is less than 75% of your home's appraised value, you can use the additional amount as a downpayment on an investment property. Let's look at an example.

Let's say you bought a property 10 years ago for $200,000.00. At the time of purchase, you arranged a new first mortgage on your property for $150,000.00. You have been making regular bi-weekly mortgage payments for 10 years and now you owe approximately $100,000.00 on your mortgage. You find a great investment property that you want to buy but you are not sure if you can afford it.

You go to your bank and the bank arranges an appraisal on your existing home that you own. The appraisal comes back at $280,000.00. Since the bank will allow you to mortgage your property up to 75% of its appraised value, you can now mortgage your property for $210,000.00. You still have your existing mortgage in the amount of $100,000.00, but if you refinance and put a new first mortgage on your property, you will have an additional $110,000.00 that you can use as a downpayment on your investment property.

Of course you don't need to use all of this extra money, but it is there if you need it. If you find an investment property that you want to buy that needs some TLC, you can use some of this money for the improvements if you like. Voila! You have just purchased a great investment property with no money down!

Don't forget, there are many other things to consider, such as rent, utilities, realty taxes, and insurance. Also, any additional expenses you incur as a result of this extra financing, such as an increase in mortgage payments, should be reimbursed to you out of the rental proceeds of the investment property.