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Can you use your home equity to buy a second home?
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The average homeowner in the U.S. can tap into nearly $200,000 worth of home equity. That’s money that can be used to pay off debt with high interest rates, make home repairs and more. In fact, with $200,000 at your fingertips, you may decide to use it to buy a second home.
But is that really a feasible option? Does it make sense to use the equity in your current home to buy a second home and if so, how can you do it? Below, we’ll break down why your home equity may be a viable option for purchasing a new home.
Compare your home equity loan options here now.
Can you use your home equity to buy a second home?
“Home equity is a perfect way to purchase a second home,” explains Shannon Eney, Vice President of Mortgage Lending with Mutual of Omaha Mortgage. Here’s what you need to know if you plan on using your equity to purchase a second residence:
How can you use your home equity to purchase a second home?
“One great option is to take out a home equity loan, which is a fixed-rate second mortgage that provides funding based on how much equity the owner has in their home,” explains Eileen Tu, vice president of product development at Rocket Mortgage. “With a home equity loan, homeowners can access lower-cost funding as compared to personal unsecured loans without refinancing their first mortgage.”
That’s important, especially considering today’s interest rate environment. After all, if you purchased your home more than 18 months ago, chances are that today’s mortgage rates are higher than the rate you’re currently paying. So, you probably don’t want to refinance your low-rate mortgage at today’s interest rates if you don’t have to.
Tap into your home equity to buy a second home today.
What are the benefits of using your home equity to purchase a second home?
There are several benefits to using your home equity to purchase a second home. Some of the most important to consider include:
- Home equity offers versatile cash: A home equity loan makes it possible to “access funding that is as versatile as cash, with no restricted uses, at a lower cost than personal loans,” says Tu. That means you can use your home equity to purchase your second home; and if there’s money left over, you may be able to use it to make any necessary renovations to your new purchase.
- Interest may be tax deductible: “Additionally, the interest paid on a home equity loan may be tax-deductible,” explains Tu. Specifically, your home equity loan interest could be tax deductible if you use the money from the loan to repair or renovate the home you used as collateral or if you use it to purchase another piece of real estate (like a second home).
- You could turn your home equity into an income stream: One “benefit of using these funds for a new purchase is turning the equity into another asset or income stream with an investment property,” explains Eney. “A lot of second homes can be used as short-term rentals, i.e. Airbnb/VRBO, creating extra revenue for a homeowner.”
Take advantage of the benefits of a home equity loan now.
The bottom line
You can use your home equity to purchase a new home and doing so may be a wise idea. Moreover, accessing your home equity can be simple with a home equity loan. If you do choose this option, you could generate a new income stream while potentially reducing your tax burden. Compare your home equity loan options to see how much versatile cash you have available to purchase a second home with today.
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Wisconsin school shooter was in contact with California man plotting his own attack, court documents say
The shooter who killed a student and teacher at a religious school in Wisconsin brought two guns to the school and was in contact with a man in California whom authorities say was planning to attack a government building, according to authorities and court documents that became public Wednesday.
Police were still investigating why the 15-year-old student at Abundant Life Christian School in Madison shot and killed a fellow student and teacher on Monday before shooting herself, Madison Police Chief Shon Barnes told the Associated Press Wednesday. Two other students who were shot remained in critical condition on Wednesday.
A Southern California judge issued a restraining order Tuesday under California’s gun red flag law against a 20-year-old Carlsbad man. The order requires the man to turn his guns and ammunition into police within 48 hours unless an officer asks for them sooner because he poses an immediate danger to himself and others.
Carlsbad is located just north of San Diego.
According to the order, the man told FBI agents that he had been messaging Natalie Rupnow, the Wisconsin shooter, about attacking a government building with a gun and explosives. The order doesn’t say what building he had targeted or when he planned to launch his attack. It also doesn’t detail his interactions with Rupnow except to state that the man was plotting a mass shooting with her.
CBS’ San Diego affiliate KFMB-TV reported that law enforcement searched the man’s home Tuesday night after the order was signed by the judge.
Police, with the assistance of the FBI, were scouring online records and other resources and speaking with the shooter’s parents and classmates in an attempt to determine a motive for the shooting, Barnes told the AP.
Police don’t know if anyone was targeted in the attack or if the attack had been planned in advance, the chief said. Police said the shooting occurred in a classroom where a study hall was taking place involving students from several grades.
“I do not know if if she planned it that day or if she planned it a week prior,” Barnes said. “To me, bringing a gun to school to hurt people is planning. And so we don’t know what the premeditation is.”
On a Madison city website providing details about the shooting, police disclosed Wednesday that two guns were found at the school, but only one was used in the shooting. A law enforcement source previously told CBS News the weapon used appears to have been a 9 mm pistol.
Barnes told the AP that he did not know how the suspected shooter obtained the guns and he declined to say who purchased them, citing the ongoing investigation.
No decisions have been made about whether Rupnow’s parents might be charged in relation to the shooting, but they have been cooperating, Barnes told the AP.
Abundant Life is a nondenominational Christian school that offers prekindergarten classes through high school. About 420 students attend the institution.
The Dan County Medical Examiner’s Office identified the two people killed Wednesday as 42-year-old Erin West and 14-year-old Rubi Vergara.
An online obituary on a local funeral site stated Vergara was a freshman who leaves behind her parents, one brother, and a large extended family. It described her as “an avid reader” who “loved art, singing and playing keyboard in the family worship band.”
West’s exact position with the school was unclear.
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