1154: How to Leverage Your Home to Buy a Rental Property - Episode 1154

Investing in Real Estate with Clayton Morris | Investing for Beginners

Clayton Morris

How To, News, Education, Business News, Business, Investing

4.4 • 1.1K Ratings

🗓️ 8 May 2025

⏱️ 8 minutes

🔗️ Recording | iTunes | RSS

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Summary

Thanks to skyrocketing home prices, American homeowners are flush with equity in their homes. It was reported that over 47% of mortgaged homes across the United States are considered equity rich. Today, we're going to talk about what this amount of equity could mean for the American homeowner.

You're going to learn why now is a great time to leverage your home to buy a rental property, and how to do it. We're going to talk about specific lending products you can use, their pros and cons, and what to consider before you use this strategy.

Transcript

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0:00.0	Well, thanks to skyrocketing home prices, American homeowners are flush with equity in their homes.
0:10.7	In the second quarter of 2023, Adam reported that over 47% of mortgaged homes in the United States were considered equity rich.
0:18.8	That's phenomenal. And it's great news for Americans who are
0:22.0	sitting on all of that equity. Yet simultaneously, many Americans have fallen into the liability
0:26.7	trap and have become burdened with high interest credit cards at the same time.
0:30.5	Now, one of my favorite financial mantras is you cannot eat equity. Why would you let that
0:35.6	untapped potential sit there in your house when you could
0:39.2	instead use it to improve your financial situation right now? You know, generally speaking,
0:44.1	most banks will allow you to borrow up to about 80% of the equity in your home. Again,
0:49.2	if you've got $100,000 worth of equity, typically they'd let you borrow about $80,000, right? And according to the
0:55.6	St. Louis Federal Reserve, homeowners are collectively sitting on nearly $30 trillion in home equity,
1:02.7	30 trillion. So if you've got a financial goal, you're striving towards whether it's investing in
1:07.8	real estate or paying off high interest debt, tapping into that home equity can be a smart way to make some progress. There are three main ways you can obtain a loan
1:16.0	on your equity. So let's go through some of them. First up is the home equity loan. A home equity
1:21.3	loan gives you access to a lump sum of money that's based on the available equity in your home.
1:25.9	They'll assess how much equity you have in the home. They'll assess, you know, how much
1:27.7	equity you have in the home and they'll basically cut you a check for that amount. This is a very
1:31.3	straightforward banking product. The lender assesses your home value and then funds your loan.
1:35.7	The terms and the interest rate are going to be separate from your original mortgage.
1:39.1	You can expect a fixed interest rate with monthly installments and you have to pay it back.
1:43.8	Like I said,
1:44.5	very basic traditional loan product. And this can be a good option for anyone who has an
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