Chat Plus: Borrow From Condo A for Condo B
This is one of the questions I couldn't get to during the Real Estate Live chat on Friday. You can read a transcript here.
Washington, D.C.: I have two homes, a condo in D.C, and a condo in Florida, which I rent out at a loss. I would like to refinance the Florida condo but cannot because it's a second home and "under water." Could I take out a home equity loan on my D.C. condo (where I have lots of equity) and pay off the Florida place? I pay 6.5 percent on the Florida mortgage, and think that home equity interest is a lot lower. Thank you.
E.R.: It's certainly worth talking with a couple of lenders to see what your borrowing options are against the D.C. condo, but I'm not sure you'll be able to beat the 6.5 percent interest rate by enough to make the deal worthwhile. Lenders are being particularly strict about condo loans now, especially if there are a lot of rentals in your D.C. condo unit. Your choices would be to do a cash-out refinance of the D.C. condo, which would probably give you the lowest long-term interest rate. A fixed-rate home equity loan against the D.C. condo would actually raise your interest rate. I just checked one lender's rates, and they range from 8.49 percent to 12.4 percent. Home equity lines of credit do carry lower rates, tied to the prime rate. But they're adjustable rates--and extremely likely to go higher than they are now. Also, lines of credit typically last only 15-20 years, which also increases your payments. Good luck.
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