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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.
A new Barbie has joined Mattel’s lineup of inclusive dolls. The first “Diwali doll” was announced by the toymaker on Friday, a few weeks shy of the Hindu holiday of Diwali, also known as the festival of lights.
The festival, which lasts for five days, is marked on Western calendars to begin on Nov. 1, but some celebrations start on Oct. 31.
The doll, created in collaboration with fashion designer Anita Dongre, features traditional elements including the lehenga skirt, floral print and golden shoes, according to Mattel’s website. The doll is available at major retailers for $40.
“The look is infused with beauty and symbolism to rejoice in victory of light over darkness with contemporary silhouettes,” the description reads for the Diwali doll.
Lalit Agarwal, country manager for Mattel India, said in a news release that through the Diwali doll, the brand is hoping to showcase “India’s vibrant cultural heritage on a global stage while continuing to celebrate the power and beauty of diversity.”
Earlier this year, Mattel announced the first-ever blind Barbie doll and a Black Barbie with Down syndrome.
In addition, to celebrate International Women’s Day on March 8 and Barbie’s 65th birthday on March 9, the doll brand announced it was adding new dolls to its Role Models collection, based on real-life singers and actresses from around the world. They’re not for sale – a one-of-a-kind doll was made for each of the honored women.
The dolls are meant to introduce “girls to remarkable women’s stories to show them you can be anything,” according to Mattel.
Hollywood actor Keanu Reeves made his professional auto racing debut on Saturday at the famed Indianapolis Motor Speedway.
“The Matrix” star, who qualified 31st out of 35 cars, ran as high as 21st before a single-car crash a little more than halfway through the 45-minute race briefly stopped him in his tracks.
Darron Cummings / AP
The 60-year-old spun into the grass without a collision on the exit of Turn 9 when he had about 21 minutes of racing left. He re-entered the course and continued driving, signaling he was uninjured.
Reeves finished 25th.
The actor is competing at Indianapolis in the Toyota GR Cup, a Toyota spec-racing series and a support series for this weekend’s Indy 8 Hour sports car event. He has a second race on Sunday.
Darron Cummings / AP
He is driving the No. 92 BRZRKR car, which is promoting his graphic novel “The Book of Elsewhere.” He is teammates with Cody Jones from “Dude Perfect.”
Reeves has previous racing experience as a former participant in the Toyota Grand Prix of Long Beach in the celebrity race. Reeves won the event in 2009.
A passenger successfully landed a small plane on Friday after the pilot had a medical emergency, the Federal Aviation Administration said.
The twin-engine Beechcraft King Air 90 was traveling from Henderson Executive Airport in Las Vegas, Nevada to Monterey Regional Airport in California, with a pilot and one other person on board, the FAA said.
The pilot suffered an unspecified medical emergency while flying, the FAA said, forcing the passenger to take the controls and make an emergency landing at Meadows Field Airport in Bakersfield, California.
The Kern Fire Department told CBS News affiliate KBAX that firefighters were called to a report of a medical emergency on the plane. The pilot was reported to be “incapacitated,” the fire department said. Firefighters saw the plane approach and land safely, then “chased” the plane down the runway in emergency vehicles to meet it.
The FAA did not release the passenger or pilot’s identities nor give an update on the pilot’s condition. The pilot was taken to an area hospital by ambulance. The passenger did not report any injuries.
The FAA and the National Transportation Security Board will investigate the incident, the FAA said.
