Can I Use the Equity in My Home to Buy a Second Home When I Refinance My Mortgage?

Yes, you can use the equity in your current home to purchase a second property. Many people do this by refinancing their home with a cash-out option and using the money taken out to make the down payment for a second home. Alternatively, you can take out an equity loan or line of credit (HELOC) to buy a second home. Cash-out refinancing allows you to access your home's equity by replacing your first mortgage with a larger mortgage. You'll pay your new mortgage and receive the difference in cash.

This lump sum can be used to finance the down payment for a second home, provided you have enough equity in your home to complete the cash-out refinance. Most lenders allow you to borrow up to 80% of the appraised value of your home in a cash-out refinance. You can also use a home equity loan to buy a second home. Since the profits from a home equity loan can be used for any purpose, that means you can use the money to purchase additional real estate if you want. However, these loans cannot be used to buy a home to replace your current primary residence, at least not immediately. Cash-out refinancing and HELOCs generally require borrowers to stay in their main home for at least one year after applying for the loan.

But it is allowed to buy a second home with the money.

April Mifsud
April Mifsud

Wannabe travel advocate. Wannabe twitter ninja. Passionate reader. Certified zombie scholar. Certified internet maven.