Your Home Buys You Another House Secret
If you're eager to unlock the secret of how your current home can finance a second property, it's time to browse options and explore the potential financial freedom waiting for you.
Understanding the Concept: Home Equity
The idea of using your home to buy another house hinges on the concept of home equity. Home equity is the portion of your property that you truly own, calculated by subtracting any outstanding mortgage balance from your home's current market value. For instance, if your home is valued at $300,000 and you owe $200,000 on your mortgage, you have $100,000 in equity. This equity can be a powerful financial tool, enabling you to invest in additional real estate.
Leveraging Home Equity: Home Equity Loans and HELOCs
There are two primary ways to tap into your home equity: a Home Equity Loan or a Home Equity Line of Credit (HELOC). A Home Equity Loan provides a lump sum of money with a fixed interest rate, ideal for those who prefer predictable monthly payments. On the other hand, a HELOC functions like a credit card, allowing you to borrow as needed up to a certain limit, with variable interest rates. Both options can be used to fund the down payment or even the purchase of a second home1.