We want to buy a second home as an investment property. The issue is coming up with the downpayment. Do we continue to save up $$ until we eventually come up with roughly $140K? Our primary home is on a 30-year note (2.6 rate), we are only 2 years in but probably have quite a bit of equity (somewhere around 200K) already given the current market. Trying to explore what options make the most sense here.

We need more info. What do you want to do with your second home (short/long term rental)? Urban/suburban/rural? How much do you expect it to cost? You have $200k equity in your house - how much do you think it's worth?

A second home is a vacation home. An investment property is one that you will rent. They have different down payment requirements. Which one are you looking for?

Would be an investment property then, we stay in it periodically, but would start off with the AirBNB/VRBO option. Likely in a mountain town. Looking at $700-800K.

ok, are you looking for a single family home or a condo? Most condo's in resort areas are called condotel's and they will require a min of 25% down.

Is it possible to do a cash out refi to get enough cash for a down-payment on a 2nd home?

Not Jay but with rates up a cash out will have rates higher than what we've seen the past couple of years and have closing costs. We use HELOCs quite a bit to create cash. No closing costs in most cases.

tejas_ayanem said:

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Would be an investment property then, we stay in it periodically, but would start off with the AirBNB/VRBO option. Likely in a mountain town. Looking at $700-800K.

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If you will stay there part of the time it can be a second home and only require 10% down.

jja79 said:

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Not Jay but with rates up a cash out will have rates higher than what we've seen the past couple of years and have closing costs. We use HELOCs quite a bit to create cash. No closing costs in most cases.

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roger, i guess the question is simply can you take equity out to put a downpayment on another home, whether it will be your primary or an investment property. Sounds like a yes. thanks.

Yes assuming you qualify with the HELOC debt.

Ya Roger, obviously the numbers need to work, but good to know its possible. Thanks.

Hoping for a single family to avoid HOA fees.

HELOC seems a good avenue to explore?

A single family or townhouse as a true second home can put down as little as 10% (although due to recent changes the 10% down rate will be comparable to an investment property). and yes, you can use HELOC or cash out to fund a down payment.

It was never mentioned what you think the market value of your house is but that's important for a HELOC. You can only borrow 85% 80% minus what's owed. So if you think your house is worth $1m (it has to appraise for this), and owe $800K, you can only get a HELOC for $50K. you won't be eligible for a HELOC.

80%

Thanks, couldn't remember because we didn't get close, we were like 45%.

tejas_ayanem said:

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Would be an investment property then, we stay in it periodically, but would start off with the AirBNB/VRBO option. Likely in a mountain town. Looking at $700-800K.

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You can buy it as your vacation home, and if it turns into a rental nothing will happen. 10% down would be a good rule from what I've experienced.

Some banks will require more than 10% down if amount of loan is considered a jumbo (greater than $647,200) so homes over $720,000 there is a chance you may be putting more down than 10%.