First time posting here. We’re outgrowing our current residence and trying to decide whether to sell or rent it out. Current home stats: 5 years into a 30-year loan at 2.25% fixed, with a monthly payment of $1,100, and an amount remaining on the loan of $226k. Home value is $410k, and similar homes rent for about $2,000-$2,300. My wife wants a new home in a neighborhood costing between $630k and $710k. We’re considering a conventional loan for the new house and renting out our current one, but we don’t have enough for a 20% down payment. We thought a HELOC might help with that. I feel like we shouldn’t sell our current residence due to the low interest rate. Our combined income is about $7,500 a month.
Don’t borrow money for a down payment. If you don’t have enough cash, you can’t afford the mortgage.
HELOCs can be expensive. Speak to a lender first to see if you can count rental income towards your monthly expenses.
Consider your monthly expenses. If they are under $3k, you can manage. Look at how much you’ve saved over the years; that will inform your decision.
Thanks for the advice! We’re currently saving about $1,500 a month and could adjust to save more. We have about $10,000 saved.
Consider waiting to change your lifestyle for a bit to see if you can handle the financial change long-term.
Where are you looking to buy?
HELOCs are good for short-term borrowing. They aren’t ideal for long-term financing. You might be setting yourself up for potential issues with tenants.
I see your point. We definitely need a solid emergency fund for both properties.