Home Courses Livestream On-Demand Resources Hall of Fame Store Training Schedule Guest: Sign In / Register

News Feed

Using a Second Mortgage for Real Estate Investing

By: Elite Legacy Education, March 14, 2017

Using a Second Mortgage for Real Estate Investing

 

Unfortunately, not everyone that wants to get into real estate investing has enough cash on hand to fully fund this type of investment opportunity. But that’s not a reason to worry. If you are confident in your plan, and are comfortable with using someone else’s money and being held accountable for the repayment of such funding then there are still some options for you.

What to do if you already have an existing mortgage.

 

We’ve heard about the hardships of people having to take out a second mortgage from their primary place of residence in times of need. However, we’ve also heard people boldly mention the idea of obtaining a second mortgage in order to fund an investment opportunity. Well, it’s important for you to know the options that exist when it comes to funding real estate investment projects. Specifically, this type of financing will have some differences in terms of structure and requirements from the loans granted for your primary residence. Take a moment to consider the following options.

 

  1. Home equity loan. This is essentially a type of second mortgage in which you use the value of your equity in your primary property to secure further funding. It is basically a term loan that is closed-ended. This means that a fixed loan amount is set to be distributed over a set number of periods at a certain interest rate. Generally, the term of these loans is anywhere from 5 to 15 years. Keep in mind that once the amount of the loan is used, you will not be able to receive further funding from it. And once the term of the loan is up, that is it – there’s no chance of renewal.

 

  1. Line of credit. Lines of credit are also often tied to your equity in your primary property, meaning they are also a type of second mortgage. The reason this and the option above are called second mortgages is due to their nature of being associated with your primary residence. Lines of credit differ from term loans in a few ways. In this case, the lender sets thelifetime of the credit. At the end of its life, the owing balance becomes due. However, you still have monthly payments which must be made based on a variable interest over the life of it. As for the actual funding, a maximum limit is set with which you can draw from and pay off as you go. When you make a payment, it clears the corresponding dollar amount which you can then use again. At the end of the agreement, it is up to the lender as to whether they will renew the line of credit.

 

  1. Loans geared for “flipping” projects. These are called fix-and-flip loans, which as you might have guessed are suitable for flipping an investment property in a shorter timeframe than if you were to say, rent the property out. Unfortunately, these types of loans come at quite the cost and sometimes have stringent requirements. Specifically, you could experience higher interest rates compared to other options, and shorter repayment timeframes.

 

  1. Typical bank loans. Last but not least, you could apply for a standard bank loan to finance the operation. This will require that you put at least 20% down payment on the property and potentially even more. The bank will take into consideration your credit history, as well as your other financial obligations to determine whether you can make the payments. Any potential income from the investment property is not factored into the calculations.

 

Here we have discussed a variety of financing alternatives for real estate investment projects. You may also want to read our article about funding your investments with other people’s money (link to financing with OPM article here).

 

There's never a shortage of money looking to back a great deal. It's simply knowing where to find it. By attending a Rich Dad Education event, our speakers will introduce you to a variety of funding sources for different types of real estate investments.

Don’t miss out on all of the ways Rich Dad Education can help you reach your goals in life!

Learn more about Real Estate Investing in our upcoming free interactive webinar! Register Here



Want the live experience? Attend an upcoming free workshop coming to your area! Register Here

The classes are very helpful in learning how to implement various strategies but the responsibility to put the knowledge into action falls on the student. Richard Cain. Aurora, CO

Browse through our Rich Dad Education reviews by clicking above!

Founded in 1992, Elite Legacy Education is a recognized global leader in quality financial education.
Legacy Education Alliance, Inc. is a leading provider of educational training seminars, conferences and services.
Rich Dad Education offers real estate & stock training based on Robert Kiyosaki's book Rich Dad Poor Dad.

© LEA Brands, Inc. All Rights Reserved.

The Elite Legacy Education word mark and logos are owned by LEA Brands, Inc. and are used with permission.

Elite Legacy Education is a trade name of Elite Legacy Education, Inc., a Florida Corporation.

The educational training program provided hereunder is not designed or intended to qualify students for employment. Our curriculum is avocational in nature and is intended for the purpose of the accumulation of wealth by, and the personal enrichment, development and enjoyment of, our students.

Privacy Policy | Terms | Cookies