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I don't quite understand your logic. You said you wanted to avoid a HELOC because you want to avoid more debt, but then say you can get a 0% down loan on a new mortgage. It's the same debt either way, the difference being the security instrument and type of loan. Why wouldn't you get the HELOC and buy the house you need now with a down payment? The advantage of financing through your rental is that the interest on that portion of the loan will be an expense on your Schedule E. If you finance 0% down on your primary residence, and you file jointly, there's a good chance that you'll be taking the standard deduction instead of itemizing, so the interest on your home will not count to lower your taxes. Add to the equation that a liability lawsuit can more readily take your asset (rental) more easily than your personal residence, and it seems more prudent to keep the debt higher on the rental and lower on your home. What am I missing here? Demand not that events should happen as you wish; but wish them to happen as they do happen, and you will go on well. -Epictetus | |||
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Do No Harm, Do Know Harm |
Scenarios like this are why I'm asking for advice. We briefly mentioned this to my MIL (20+ years as a real estate agent) and she said the bank costs could be more than the savings. We'll have to evaluate that further. Knowing what one is talking about is widely admired but not strictly required here. Although sometimes distracting, there is often a certain entertainment value to this easy standard. -JALLEN "All I need is a WAR ON DRUGS reference and I got myself a police thread BINGO." -jljones | |||
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Do No Harm, Do Know Harm |
Sidetrack?...not really. The numbers I'm talking aren't going to put us in a bind where we won't have money for maintenance, etc. We're looking at 25% of monthly net toward the mortgage/insurance/taxes/etc payment. I'm not figuring any of my OT or my off-duty gigs, or my wife's annual bonus, into the computation for a mortgage payment. Those numbers are not insignificant. Plus I just got promoted and will have defined raises over the next 4 years. Those dollars will still go to pay the non-mortgage debt off, and it will be completed in two years or so. Actually, everything will probably be done this coming December even if we buy, except for my Jeep payment. The Jeep payment is what pushes the number out to 2 years. Once those things are paid off, the beach house will be next, then the new Charlotte house. If we wait two years, the house we need (we have two kids and may have a third) could be another 30k, plus we just spend 36k in rent, and we aren't paying off the debt any faster by renting--remember we'd be shifting the debt payment money to a down payment fund. Or maybe the house will be 30k less, if the market tanks. That (and the scenario in the post above mine) are exactly why I'm debating all of this, and I appreciate all sides of the argument. Knowing what one is talking about is widely admired but not strictly required here. Although sometimes distracting, there is often a certain entertainment value to this easy standard. -JALLEN "All I need is a WAR ON DRUGS reference and I got myself a police thread BINGO." -jljones | |||
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Member |
I'd just buy the house you NEED, now. Not necessarily the one you want. Yeah, I feel housing prices in my market will be stagnant or even dip 10-20 percent in the next few years. But, you're a mortgage buyer. So even if say housing prices dip 10 percent, interest rates are almost guaranteed to be at least 1 percent higher, so your monthly payments will be the same, if interest rates go up to a normal market of 5.5-6 percent on mortgages you'll actually probably be backwards. And, interest rates are and need to go up. That being said, find a house that's the size and layout you need, and then do some remodeling projects when funds allow......everyone seems to always want more house than they need or can truly afford. Buy what you need, not the bigger house that you want because being house poor can really suck when something breaks or you need a new roof. Doing a heloc on the beach house, so you have a 20 percent down payment on the house you're buying makes a whole lot of sense. You won't be paying PMI, you can write off all of the HELOC on the beach house, and you have plenty of equity there..... | |||
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The last time I did a HELOC it cost me about $200. The PMI will be much higher than that by the time you get that removed. Even if you have to get a new appraisal for the HELOC, that’s a wash because a new appraisal is usually required to remove PMI. Or a new refinance, all of which incurs costs anyway. All of the above doesn’t even consider the tax savings from the interest being on the rental, which will probably offset, in the first year, the cost of originating the HELOC. Demand not that events should happen as you wish; but wish them to happen as they do happen, and you will go on well. -Epictetus | |||
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If you see me running try to keep up |
I no longer believe in buying a “house of my dreams”. I’m tired of having a house that’s paid for then getting gouged with taxes and insurance. I could sell my house and buy something larger but I don’t want to pay more taxes. Heck, a couple blocks from my house is a real nice neighborhood with houses in the millions. I looked at one house and what I pay a year in taxes they pay monthly. They pay almost 50 grand a year in taxes. If I build anything it will be a barndiminium. Basically a metal building with housing inside. They are taxed differently than houses so taxes are much lower. | |||
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Do No Harm, Do Know Harm |
So I'm reading that a HELOC on an investment property is evidently more difficult, if possible at all, to obtain and more expensive than a regular HELOC on your primary home. I'll research further, but that must be what my MIL was talking about. They recently went through some of this themselves I believe. Knowing what one is talking about is widely admired but not strictly required here. Although sometimes distracting, there is often a certain entertainment value to this easy standard. -JALLEN "All I need is a WAR ON DRUGS reference and I got myself a police thread BINGO." -jljones | |||
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Member |
Rather than reading about it, go to your local bank and find out. They'll tell you, one way or another. With the amount of equity you have, a heloc shouldn't be a problem on it most likely. | |||
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Do No Harm, Do Know Harm |
My credit union straight up won't do it. Only primary residences. Guess we will have to broaden our horizons... Knowing what one is talking about is widely admired but not strictly required here. Although sometimes distracting, there is often a certain entertainment value to this easy standard. -JALLEN "All I need is a WAR ON DRUGS reference and I got myself a police thread BINGO." -jljones | |||
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