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QUOTE (JoefromTO @ Apr 27 2009, 12:17 PM) That`s what i understood as well. What he is saying is that the banks will loan 80% and you have to come up with 20%. That means they want you to have your own money tied up...so that you stand to lose something if you walked away from you house (speaking drastically). They know you won`t just walk away from 20%, which is what mitigates the risk for them lending you the remaining 80%.
So you can`t put down 20% and then get a line of credit on that same amount.
Here`s an example.
You purchase a property for $300,000.00 and put 20% down and the bank provides the rest. Let`s put that in numbers...
Price of property ============================ $300,000.00
Down payment =============== $300,000.00 x 20%= $60,000.00
Bank loan ==================$300,000.00 x 80%= $240,000.00
Lets say that after 5 years, you have paid down your debt agressively and have a balance of roughly $150,000.00
Now you want to put a line of credit on the property to access some of that equity to buy another investment property. So how much will the bank provide?
Ok, the way I understand it is this...Let say the property is now worth $350,000.00 after 5 years and this value is established by the bank when they do an appraisal of its current value. If the bank only lends up to 80% then here`s the amount of equity you can have access too...
Current appraised value=================================$350,000.00
80% of that==========================$350,000.00 x 80%= $280,000.00
Subtract debt ==================$280,000.00 - $150,000.00= $130,000.00
$130,000.00 is the amount of Line of credit the bank would allow you to access, thereby still having 20% of your own equity still tied up.
Correct me if I`m wrong, but that`s the way I understand it.
I don`t see how the fact that its your primary residence would have any relevance to this, unless the bank is willing to loan more than 80% to begin with.
Good examples. correct me if i am wrong but 80% is more likely if you have a job. if he achieve freedom by then and left your job, then it might be 65% as a non-employed/full time RE investor. meaning less money can be taken out as part of re-financing/re-qualifying. (well, depending on TDS and other formulas..)
So you can`t put down 20% and then get a line of credit on that same amount.
Here`s an example.
You purchase a property for $300,000.00 and put 20% down and the bank provides the rest. Let`s put that in numbers...
Price of property ============================ $300,000.00
Down payment =============== $300,000.00 x 20%= $60,000.00
Bank loan ==================$300,000.00 x 80%= $240,000.00
Lets say that after 5 years, you have paid down your debt agressively and have a balance of roughly $150,000.00
Now you want to put a line of credit on the property to access some of that equity to buy another investment property. So how much will the bank provide?
Ok, the way I understand it is this...Let say the property is now worth $350,000.00 after 5 years and this value is established by the bank when they do an appraisal of its current value. If the bank only lends up to 80% then here`s the amount of equity you can have access too...
Current appraised value=================================$350,000.00
80% of that==========================$350,000.00 x 80%= $280,000.00
Subtract debt ==================$280,000.00 - $150,000.00= $130,000.00
$130,000.00 is the amount of Line of credit the bank would allow you to access, thereby still having 20% of your own equity still tied up.
Correct me if I`m wrong, but that`s the way I understand it.
I don`t see how the fact that its your primary residence would have any relevance to this, unless the bank is willing to loan more than 80% to begin with.
Good examples. correct me if i am wrong but 80% is more likely if you have a job. if he achieve freedom by then and left your job, then it might be 65% as a non-employed/full time RE investor. meaning less money can be taken out as part of re-financing/re-qualifying. (well, depending on TDS and other formulas..)