Using Your Home Equity to Fund a Rental Down Payment
One of the biggest myths in real estate investing is that you need a pile of fresh cash to buy your first rental. If you already own a home and it’s gone up in value, you may be sitting on the down payment already. Here’s how to put your home equity to work.
How much you can access
Lenders will generally let you borrow against your home up to 80% of its value through a refinance, or up to 65% through a HELOC. Subtract what you still owe, and the difference is equity you can turn into a down payment on an investment property. For a lot of long-time owners, that’s a substantial amount.
Refinance or HELOC?
A refinance gives you a lump sum at the lowest rate, which is clean when you’ve found your property and know exactly how much you need. A HELOC gives you flexible, revolving access at a slightly higher rate, which is handy if you’re still shopping or want to reuse the funds for future deals. Each has its place, and the right choice depends on your plan.
The leverage math
Using equity to fund a 20% down payment lets you control a whole additional property while your original home keeps appreciating. Done responsibly, with a property that cash flows and a comfortable buffer, this is exactly how most multi-property investors got started.
Do it with a plan
Leverage cuts both ways, so the numbers have to work: the rental should carry itself, and you want a cushion for vacancies and rate changes. Run the full picture before you pull equity, and you turn a paper gain on your home into a real, income-producing asset.
Sitting on home equity?
Let’s see how much you can access and what it would fund. Your next property might be closer than you think.
Tyler Salmon, Mortgage Agent Level 2 (Licence #M21003803) · Tango Ontario (FSRA #13691)
