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How to use a home equity loan to buy a second home
It’s exciting to purchase a second home. But, it can be difficult for many to afford to do so. After all, making a second home purchase typically requires a significant up-front cash investment. But, it doesn’t have to. You may be able to use the equity you’ve built up in your primary residence to cover the initial cost of your second home.
And the average American homeowner has quite a bit of equity – about $299,000 worth on average. Moreover, those homeowners can tap into an average of $193,000 of that equity while still maintaining a healthy stake in their homes. So, your home equity may provide all the liquidity you need to purchase your second home.
One way to access the value that’s tied up in your home equity is to take out a home equity loan. These loans typically offer lower rates than other popular lending options because they’re backed by your home. And, those rates are typically fixed. In turn, predictable payments may make it easier to budget for the monthly cost of your new purchase. But how exactly do you use a home equity loan to buy a second home?
Find out how much home equity you could use toward the purchase of a new home now.
How to use a home equity loan to buy a second home
When you use a home equity loan to buy a second home, “you gain access to capital without selling off assets, leverage your investments for potentially higher returns, and diversify your portfolio with real estate assets,” explains Dutch Mendenhall, founder of the alternative investments firm, RAD diversified. Follow the steps below to get started.
Step #1: Determine your budget for your second home
The average home in the United States is worth about $344,000. But that doesn’t mean you can expect the price of your second home to be exactly that number. Home prices vary depending on a wide range of factors like location, the size of the home, amenities, the size of the lot the home sits on and more. Think about the location where you want to buy your second property and other factors that may impact its price. Then create a reasonable budget for your purchase.
Compare leading home equity loan options now.
Step #2: Determine how much home equity you need to tap into
In order to determine how much home equity you’ll need for your purchase, calculate reasonable down payment and closing cost expectations based on the budget you came to. Keep in mind that a typical down payment is around 20% of the cost of the home and closing costs can be as high as 6% of the cost of the home.
So, say your budget for your second home is $300,000. You’ll likely need up to $78,000 in available funding to cover the initial costs of the purchase – $60,000 for the down payment and $18,000 for the closing costs.
Next, consider how much money you already have toward the purchase of your second home. If you already have $20,000, you’ll then need a home equity loan for the remaining $58,000 of the above costs.
Step #3: Apply for a home equity loan
Next, compare your home equity loan options and apply for the one you believe fits best in your situation. When you apply for the loan, consider requesting a little more money than you need to purchase your second home in case any surprise expenses arise.
And when you receive the money, look for ways to earn a reasonable return on it while you go through the rest of the steps below. A high-yield savings account can help.
Step #4: Go house shopping and make an offer
Next, go on a house hunt. When you find a second home that meets your needs, make an offer. If the offer is accepted, move onto the next step.
Step #5: Apply for a mortgage on your second home
Now that you have an accepted offer and agreed upon price, it’s time to apply for the mortgage. Keep in mind that lenders set their own interest rates, fees and terms. So, you’ll want to find one with a reasonable interest rate, low fees and terms you can afford.
Step #6: Close on your second home
When it’s time to close on your home, use the money you’ve saved in combination with the home equity loan you took out to purchase your second home.
Use a home equity loan to cover the initial cost of your second home purchase now.
The bottom line
It’s relatively simple to use a home equity loan for the purchase of your second home. And since the average American homeowner has such a high amount of available equity right nows, it’s a viable option for many Americans. Follow the steps above to use a home equity loan to purchase your second home now.
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American and U.K. climbers rescued after 2 days stranded on Himalayan mountains in India
An American climber was rescued after she and another alpinist from the U.K. were stranded for two days at more than 20,000 feet in the Himalayan mountains.
Michelle Dvorak, 31, and Fay Manners, 37, went missing on Thursday after their equipment and food tumbled down a ravine while trekking up India’s Chaukhamba mountain, CBS News partner BBC reported.
The pair sent an emergency message but search and rescue teams were unable to find them.
Manners told the BBC they were “terrified” as they tried to make part of the descent down the treacherous mountains without supplies.
“I watched the bag tumble down the mountain and I immediately knew the consequence of what was to come,” she said. “We had none of our safety equipment left. No tent. No stove to melt snow for water. No warm clothes for the evening.”
The terrifying ordeal intensified when it started to snow. They took cover on a ledge while waiting for rescuers.
“I felt hypothermic, constantly shaking and with the lack of food my body was running out of energy to keep warm,” Manners said.
The rescue was made difficult because of the conditions, including bad weather, fog and high altitude.
“The helicopter flew passed again, couldn’t see us. We were destroyed,” Manners told the BBC.
On the second day, the pair began to cautiously abseil down the mountain. They spotted a team of French climbers coming toward them. Manners said they shared their equipment and food and contacted the helicopter company with an exact location.
“I cried with relief knowing we might survive,” she said.
The Indian Air Force said in a post on the X social media platform that their helicopter airlifted the climbers from 17,400 feet after “battling two days of bad weather.”
Chaukhamba is a mountain massif in the Garhwal Himalaya in northern India.
CBS News
Biden sends more troops to North Carolina for continued Hurricane Helene response
President Biden approved the mobilization of another 500 active-duty troops to North Carolina to assist in the recovery efforts after the deadly and devastating Hurricane Helene.
“With a total of 1,500 troops now supplementing a robust on-the-ground effort – including more than 6,100 National Guardsmen and more than 7,000 Federal personnel – the Biden-Harris Administration is mobilizing all relevant resources to support families as they begin their road to rebuilding,” the White House said in a statement Sunday.
Mr. Biden previously announced that the federal government would cover “100%” of costs for debris removal and emergency protective measures in North Carolina for six months. The Biden administration has also released more than $137 million in federal funds – including $100 million in transportation funds for North Carolina to begin rebuilding damaged roads and bridges.
More than 800 people unable to return home are staying in lodging provided through FEMA, and 22 shelters are still housing nearly 1,000 people as mobile feeding operations continue to help survivors.
“My Administration is sparing no resource to support families as they begin their road to rebuilding,” Biden said. “We will continue working hand-in-hand with local and state leaders – regardless of political party and no matter how long it takes.”
Earlier Sunday, North Carolina Sen. Thom Tills called for more resources to bolster the relief effort and likened the damage to Hurricane Katrina’s mark on Louisiana in 2005.
“The scope of this storm is more like Katrina,” he told CBS News’ Margaret Brennan on “Face the Nation with Margaret Brennan”. “It may look like a flood to the outside observer, but again, this is a landmass roughly the size of the state of Massachusetts, with damage distributed throughout. We have to get maximum resources on the ground immediately to finish rescue operations.”
Mr. Biden, Vice President Kamala Harris and former President Donald Trump have all traveled to some of the impacted regions.
Hurricane Helene caused catastrophic damage from Florida into the Appalachian mountains and killed more than 225 people across multiple states. That number includes 114 killed in North Carolina alone.
The White House said Mr. Biden has also been briefed on Hurricane Milton, which is forecast to make landfall in Florida’s Tampa Bay area as a major storm on Wednesday.
U.S. disaster relief chief blasts false claims about Helene response
Deanne Criswell, who leads the Federal Emergency Management Agency, said on Sunday that the recent false claims and conspiracy theories about the federal response to the storm are “demoralizing” aid workers.
“It’s frankly ridiculous, and just plain false. This kind of rhetoric is not helpful to people,” she said. “It’s really a shame that we’re putting politics ahead of helping people, and that’s what we’re here to do. We have had the complete support of the state,” she said, referring to North Carolina.
Republicans, led by Trump, have helped foster a frenzy of misinformation over the past week among the communities most devastated by Helene, promoting a number of false claims, including that Washington is intentionally withholding aid to people in Republican areas.
Trump accused FEMA of spending all its money to help immigrants who are in the United States illegally, while other critics assert that the government spends too much on Israel, Ukraine and other foreign countries.
Tillis, a Republican, on Sunday rejected that claim, telling “Face the Nation with Margaret Brennan” that resources being used on immigration is “not yet … affecting the flow of resources to western North Carolina.”
Tillis said the stream of misinformation about relief efforts in North Carolina is a “distraction.”
“I believe that we have to stay focused on rescue operations, recovery operations, clearing operations, and we don’t need any of these distractions on the ground,” Tillis said. “It’s at the expense of hard-working first responders and people that are just trying to recover their lives.”
Mr. Biden said in a statement Sunday that his administration “will continue working hand-in-hand with local and state leaders –- regardless of political party and no matter how long it takes.”
CBS News
Rep. Mike Turner says all “candidates need to deescalate” after Trump assassination attempts
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