I am planning to buy a new house. What would be better, to take two loans (primary and secondary) on the new home, or to take one loan and home equity from my first home (which was paid in full) to put into the new house?
It’s usually pretty irrelevant which option you use, Lenders will consider you total net worth in setting rates, so in effect you end up borrowing against both homes. The only slight difference might be that it you are at risk of defaulting on the second home, not having the first encumbered could be better. But since lenders know that as well, they might give you a higher rate for keepng the first house out of the mix.
Home equity or second mortgage?
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It’s usually pretty irrelevant which option you use, Lenders will consider you total net worth in setting rates, so in effect you end up borrowing against both homes. The only slight difference might be that it you are at risk of defaulting on the second home, not having the first encumbered could be better. But since lenders know that as well, they might give you a higher rate for keepng the first house out of the mix.
References :
Honestly, I wouldn’t put a home equity on the first, not unless you absolutely have to. If you dont have any liens on the primary, keep it that way. The more I understand about home equities from an origination point of view, the more I tend to think they’re a bad idea all together. Keep the financing to one property, good luck
References :
mortgage broker