Thread: House buying question

I know up hear in Canada you can borrow against your own home up to either 80 or 90% of the Value

So if your home is worth 100,000
and you have 40,000 left on your mortgage you can borrow up to the 90,000 or an additional 50,000

Originally Posted by Doublebase

Nobody can seem to answer this for me. Figure I would try here.

Can you borrow money from your current house to put down on another house you want to purchase? For example, I currently own a townhome. I plan on selling it within the next 5 years. Can I borrow lets say 100K from it to put down on another house that I plan to purchase? That is saying I have 100K in equity in the home. It's worth 250K and I owe 150K.

My plan is to rent the townhome out when I buy my next house. I am at a point now where I need to decide if I should keep paying down my current house or just start saving money in a savings account for a down payment. As we know, savings accounts are basically like putting the money under your mattress. Paying down my current house is canceling interest and saving money. Money will be working harder doing that. My other worry is that I won't have any money set aside for a down payment. Now if I could borrow money from my current home when I am ready to purchase then I would be ok.

odds are today you won't find anyone to underwrite the loan on the 2nd home when they find out the money for the deposit came from equity on home #1. the lender will inquire about the source of the earnest money when they request your banking records for the previous 6 months, etc.

* I've been doing loans off and on since '94 but this is how is used to work not sure about how any of the new banking regs have effected the purchase of investment properties

Originally Posted by LAM

odds are today you won't find anyone to underwrite the loan on the 2nd home when they find out the money for the deposit came from equity on home #1. the lender will inquire about the source of the earnest money when they request your banking records for the previous 6 months, etc.

* I've been doing loans off and on since '94 but this is how is used to work not sure about how any of the new banking regs have effected the purchase of investment properties

So then it would make sense to not pay down the first house and just save money for a deposit.

since 2nd home buyers are turning out to be the biggest mortgage defaulters they are really going to scrutinize your loan app especially your DTI ratio. you may want to leave those monies your bank acct for several months like 4-6 if you can before purchasing the 2nd property. remember that the interest rates on investment properties are higher (by law) then the interest rates on the primary residence there are also less tax deductions on investment properties.

Originally Posted by LAM

since 2nd home buyers are turning out to be the biggest mortgage defaulters they are really going to scrutinize your loan app especially your DTI ratio. you may want to leave those monies your bank acct for several months like 4-6 if you can before purchasing the 2nd property. remember that the interest rates on investment properties are higher (by law) then the interest rates on the primary residence there are also less tax deductions on investment properties.

But I already have the loan on my 1st property. It is currently my primary residence. Has been for the last 4 years. I plan on upgrading to a large house and making that my primary residence. So the first house (my townhome) should not be affected.

^ This is/was common, when renting out the first owner-occupied home, and buying your second "owner-occupied" home.

As LAM said, it depends on the scrutiny that may exist (or not exist) now.

Originally Posted by Doublebase

I plan on upgrading to a large house and making that my primary residence. So the first house (my townhome) should not be affected.

you may want to check the docs and loan terms on your 1st mortgage. some lenders will put you in default for trying to switch/change primary or principle residences.

Still can't get a clear answer on what I should do. I guess it's a complex question. I am just going to pay down my first house and go from there. At least my money will be working for me instead of sitting in a 1% savings account.