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Equity Used For Down Payment
 Scott,
Here's my question. My husband and I want to buy a home being built
in a new development. Our present home worth $260,000 has no
mortgage except a $30,000 home equity loan. We need about $15,000
down payment for the home being built. Should we open a home-equity
line of credit to pay the down payment? We will be selling our
existing home so everything will be paid back at the settlement. If
not, where is the best place to get the $15,000? We have several
credit cards with 0 balances. Should we take a cash advance on one
of those? Thanks.
--Marian
Marian,
 Great question!
Coming up with the down payment for a
house is always a major concern. When my wife and I purchased our
house, we had to use our credit cards, and other strategies, to come
up with the cash. However, this is risky because mortgage companies
want to be sure they track all the money for that down payment. They
don't want you to borrow from your credit cards because you must
come up with actual cash. Or else, it's a 100% financed home.
If I were you, I would get the money
from the home-equity line of credit since it's linked to your
existing house, or simply get a home equity loan. In fact, you could
probably get a super large loan, like say, $150,000 and use that as
a down payment since your home is going to be sold by settlement
time.
Since you're putting down such a large
amount toward the new home, the mortgage bank won't really care too
much about the new mortgage since they're lending you far less than
the value of the house. Then, when you sell the existing house and
get $260,000, you can pay back the $180,000, still have $80,000 cash,
plus have $150,000 equity in the new home!
The bottom line is that since you're
going to be selling your existing house, and you have a lot of
equity, you also have creative financing options.
Good luck and please let me know what
happens!
Regards,
Scott
UPDATE
Scott,
Just to fill you in, we opened the
line of credit for our down payment. Our old house settled in May
for more than we anticipated, and we made settlement on the new house
in July.
We only needed to take a 10 year
mortgage with a 4.62%!! Not bad huh? Thanks for your advice.
I love your newsletter.
--Marian
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