Tom Hanna Business and Real Estate

For homeowners interested in purchasing investment properties, one of the best sources for the down payment (or even the entire purchase price) may be to borrow against the equity in your current home, to refinance your current home. A home refinance will usually result in lower combined payments than taking out a separate ‘investor’ type loan to buy a property.

Advantages include:

• Tax deductibility of mortgage interest on first and second homes to offset your employment income (talk to your tax professional, I personally recommend consulting a CPA for all tax matters)
• Lower interest rates on owner occupied homes
• Avoiding the 30% downpayment often required on “investor” type loans by borrowing the entire purchase amount
• Owning the investment property “free and clear”
• Lower total payments can mean immediate cash flow improvement

Disadvantage:

Puts your home at risk. This is offset somewhat if the rental is “free and clear” and you’re willing to move to the rental if needed.