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Can you use home equity to buy a duplex?
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The average homeowner in the U.S. currently has close to $300,000 in home equity. And since borrowing against home equity is currently cheaper than many other options, especially credit cards, many borrowers are opting to use it.
Two popular ways consumers can tap their home equity is to take out a home equity loan or home equity line of credit (HELOC). You can use home equity funds for any legal reason, and common uses include home renovations and repairs. If you use home equity for those purposes, you may qualify for a tax deduction.
That said, while there are tax benefits to using your home’s equity for those purposes, you can tap your home’s equity for various other purposes, such as consolidating debt or paying for school. You can also use it to buy a second home. And if you’re interested in purchasing a real estate investment property, you may wonder: Can I use a home equity to buy a duplex? The quick answer is yes, but you should weigh the pros and cons before proceeding.
Start by seeing what home equity loan rate you could lock in here now.
Can you use home equity to buy a duplex?
In short, yes, you can use home equity to buy a duplex but there are some nuances to consider. Here’s when it may make sense – and when it may not – according to the experts we spoke with.
When to use home equity to buy a duplex
“Using home equity to purchase a duplex can be a smart move if the rental income covers the loan payments and offers additional cash flow,” says Tyler Meyer, certified financial planner and founder of RetireToAbundance.com.
He adds that it could be beneficial, especially if the property value is likely to appreciate and you have a clear plan for managing the property and tenants.
Steven Calio, CFP and CEO of financial planning firm CSG Financial, thinks it could make financial sense if the duplex will generate rental income. And he adds that it could also be ideal for those looking to house hack — live in one unit while a tenant rents out the other — because it can reduce your living expenses.
In addition, Steven notes that using a home equity loan or HELOC could be an affordable financing option. After all, they typically come with lower rates than other types of debt like personal loans and credit cards.
Katie Lindquist, certified financial planner and founder of Lindenwood Financial, says using your home equity to purchase an investment property could be appropriate as a short-term financing solution. “For example, if you have plans in the near future to move into half of the duplex as your primary residence and sell your other home,” she says.
See how much home equity you have to access online today.
When to not use home equity to buy a duplex
Although using your home equity to buy a duplex can be cheaper than other financing options, there are some major potential drawbacks to consider.
Meyer said he’d advise against tapping your home equity to purchase a duplex if you’re already carrying significant debt, lack an emergency fund or if the rental market is uncertain. After all, if you’re relying on rental income to repay the loan and it doesn’t come through, one major consequence is that a lender could foreclose on your home.
Lindquist says she’d advise against taking out a very large home equity line of credit, for any reason, without a practical plan to pay it back – or without a financial safety net in the form of other liquid assets.
Other ways to finance a duplex
If you want to purchase a duplex and want to avoid the downsides of tapping your home’s equity, explore alternatives.
For example, consider taking out a primary mortgage to purchase a duplex, says Lindquist. “This removes your primary residence from the picture entirely, and it can open up different loan and rate options that may be more beneficial for your situation,” she adds. After all, rates for primary mortgages are typically lower than second mortgages, such as home equity loans and HELOCs.
Another possible option, says Meyer, is pooling your financial resources together with a partner to reduce financial risks.
See what new mortgage interest rate you could qualify for now.
The bottom line
You can use your home equity to buy a duplex or as another investment. And doing so could make financial sense as long as the property generates enough income to offset your borrowing costs. However, before you go down this path, assess your current financial situation to determine whether you can afford to repay the loan. Meyer recommends that homeowners consider this route, conduct thorough market research, ensure they have a reliable property management plan and keep a financial buffer for unexpected expenses. If you need help deciding whether it makes sense for your unique situation, consider contacting a certified financial planner or real estate professional.
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Long before comic book characters dominated movie screens, actor Christopher Reeve made the world believes in superheroes with the 1978 classic “Superman.”
Reeve died in 2004, nearly a decade after an accident re-shaped his life. “Super/Man: The Christopher Reeve Story” is using interviews with family and friends and never-before-seen home videos to explore his real-life heroism.
Reeve started his career on the stage, studying at the prestigious Juilliard School and living with comedian Robin Williams. The pair had a friendship that was “more like a brotherhood,” said Reeve’s son Matthew. Reeve was in awe of Williams’ energy and versatility, Matthew Reeve said, but audiences quickly clued into Reeve’s own star power when he took on the role of the Man of Steel.
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To his children, though, he “was just dad,” Matthew Reeve said. The documentary explores how Matthew Reeve and his sister Alexandra Reeve Givens grew up watching their dad take the stage as Superman. “Super/Man” also reveals their heartbreak over their parents’ breakup and the joy they found when Reeve re-married. He tied the knot with Dana Reeve in 1992, and the pair welcomed another child, William Reeve, later that year.
“Dana was sunshine,” Alexandra Reeve Givens recalled. “She just brought joy with her wherever she was and could find it even in the darkest moments.”
Those dark moments came suddenly, when in 1995, a near-fatal horseback riding accident left Reeve paralyzed from the neck down. The documentary allows viewers to see, for the first time, what went on out of the public’s view. Reeve can be heard talking about how he “ruined (his) life and everybody else’s,” but in a touching moment, old friend Robin Williams is seen visiting him in the hospital.
“Robin showed him ‘Hey, you’re still you,'” Alexandra Reeve Givens said. “‘You still have this foundation of friendship and people around you, who adore you. And you’re going to find those fun moments in life again.'”
That support from friends and family re-ignited Reeve’s legacy of activism. He made appearances at the Democratic National Convention and the 68th Academy Awards in 1996, about a year after the accident. Matthew Reeve said watching his father address his industry peers at the Oscars was “one of (his) most proud moments.”
“It was just a production for him to get out of bed every morning, let alone get across the country and go out in public for the first time,” Matthew Reeve said. “It was a big deal. It was a big deal to him, but it was also a big deal to the entire disability community. We stayed up in London till like three in the morning to watch that live. It’s a fond memory.”
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Reeve also went on to launch what would become the Christopher and Dana Reeve Foundation, which is dedicated to advancing research into spiral cord injury and help individuals and families impacted by paralysis. It was his dad’s mission to find a cure, Matthew Reeve said, while his stepmother wanted to focus on improving the lives of paralyzed people and their families. The foundation and Reeve’s platform helped bring unprecedented attention and funding to spinal cord injury research.
Reeve even kept acting and realized his lifelong dream of directing with the 1997 HBO movie “In the Gloaming.” Reeve died in 2004 from heart failure at 52.
“There is a huge amount of great actors and actresses out there, where their filmography might be amazing and what they achieve on a cultural level might be amazing, but have they actually achieved anything really as a human that moves the needle for our society?” said filmmaker Ian Bonhote, who made the documentary with Peter Ettedgui. “And Chris has done both things.”
“Super/Man: The Christopher Reeve Story” will open in theaters on Friday, Oct. 11.
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