Real Estate

Thinking of getting a second property

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  • Oct 6th, 2015 12:46 am
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[OP]
Sr. Member
Apr 26, 2007
610 posts
47 upvotes

Thinking of getting a second property

Want to increase my real estate portfolio and thinking of getting another property. I currently own a home ($200 mortgage bal., $400k value) and want to rent it out and move in to a new home.

My income is $75k and I dont have any other debts.

The question is if I get a HELOC and use it as a downpayment for the new home, what price range should I be looking at for the new home?

I dont want to end up in a very high priced home, only be paying interest-only payments on the HELOC and end up in a debt hole.
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Sr. Member
Mar 9, 2010
543 posts
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Toronto
You would be better off using the HELOC to purchase the second home and rent out that one. Interest on the borrowed amount is tax deductible.
[OP]
Sr. Member
Apr 26, 2007
610 posts
47 upvotes
ajferreira wrote: You would be better off using the HELOC to purchase the second home and rent out that one. Interest on the borrowed amount is tax deductible.
I know it would be tax-deductible but another reason to rent it out is that I am considering a relocation in my job so instead of selling the current place I want to rent it out.
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Deal Addict
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Mar 26, 2015
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BC
ajferreira wrote: You would be better off using the HELOC to purchase the second home and rent out that one. Interest on the borrowed amount is tax deductible.
Are only HELOC loans tax deductible, or is it any investment property?

HELOC rates are a bit higher no? I just checked - they are. So why do people go with a higher interest rate loan?...
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Sr. Member
Mar 9, 2010
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Toronto
canucky1 wrote: Are only HELOC loans tax deductible, or is it any investment property?

HELOC rates are a bit higher no? I just checked - they are. So why do people go with a higher interest rate loan?...
It's actually neither. When borrowing and the purpose of the funds is to invest, then the interest on the borrowed funds are tax deductible. Could be from a HELOC or could be from another source.
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Mar 26, 2015
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Oh I see, thanks. OK then I presume people access HELOC because it is an already approved and open line of credit, rather than it has its own tax benefits. Makes sense now.
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Sep 24, 2010
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canucky1 wrote: Oh I see, thanks. OK then I presume people access HELOC because it is an already approved and open line of credit, rather than it has its own tax benefits. Makes sense now.
One needs to apply for a HELOC (it's not already approved and it's not open in the sense that its maxed at the 65% of the LTV by most banks) but interest rates are usually much lower than the unsecured lines of credit.
[OP]
Sr. Member
Apr 26, 2007
610 posts
47 upvotes
fizzerd wrote: Want to increase my real estate portfolio and thinking of getting another property. I currently own a home ($200 mortgage bal., $400k value) and want to rent it out and move in to a new home.

My income is $75k and I dont have any other debts.

The question is if I get a HELOC and use it as a downpayment for the new home, what price range should I be looking at for the new home?

I dont want to end up in a very high priced home, only be paying interest-only payments on the HELOC and end up in a debt hole.
Any advice on the original post?
Thank my post if it helped!
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Apr 20, 2011
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It depends on what percentage of down payment you desire to put on your 2nd place.
Sr. Member
Mar 9, 2010
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Toronto
fizzerd wrote: Any advice on the original post?
It would all come down to what you are comfortable with. Do you know what the market value for rent that your current home would bring in? Would you be cash flow positive? You wouldn't necessarily want to be taking a loss at the rental property and having to pay the mortgage/expenses at the new property as well.

And as for the price of the new home, if you're looking for something that suits your needs, that should dictate the price of the home and also how much to borrow against the HELOC for the down payment (most likely 20% of the new homes purchase price).
Deal Fanatic
Nov 11, 2008
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Sorry for bumping this thread, but I am kind of in the same mindset.

My question is, if my mortgage company doesn't offer a HELOC, what are my options?
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Apr 20, 2011
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You could get one of these. Its a mortgage not a heloc so you won't be limited to 65% of the value of your home as you would with a heloc. So you could apply for one of these and if you have at least 80% equity, pay off your existing mortgage.

any money you make is automatically credited against your mortgage since it becomes a giant checking account. and you can pay extra amounts anytime. and you don't need to keep $5000 here, $10,000 there etc. simply throw every dime into the mortgage saving yourself interest. and you can still take money out at any time up to your credit limit using the ATM card or write a check.

they also have a similar product for rental properties as well.

there is a product for self employed individuals but that is limited to 65% the home's value

http://www.manulifebank.ca/wps/portal/b ... /mortgages
Deal Addict
Oct 29, 2010
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popbottle wrote: You could get one of these. Its a mortgage not a heloc so you won't be limited to 65% of the value of your home as you would with a heloc. So you could apply for one of these and if you have at least 80% equity, pay off your existing mortgage.

any money you make is automatically credited against your mortgage since it becomes a giant checking account. and you can pay extra amounts anytime. and you don't need to keep $5000 here, $10,000 there etc. simply throw every dime into the mortgage saving yourself interest. and you can still take money out at any time up to your credit limit using the ATM card or write a check.

they also have a similar product for rental properties as well.

there is a product for self employed individuals but that is limited to 65% the home's value

http://www.manulifebank.ca/wps/portal/b ... /mortgages
Do they have that for all mortgage lenders? I'm with CMLS Financial.

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