Lux Investing

If you pull equity out of one house is to invest the money in another, How is it an interest free loan ?

Public Comments

1. It's not. If you use an equity line from one house to put into another, you are paying interest on the equity line
2. if it is your equity and you did not "borrow" it, then you are putting it somewhere else and there is no interest to yourself on money that is already yours......Now, if you refi and pull equity out, then the interest may go up due to the refi and you are paying interest on the principal on the loan but it still is "interest free" as it still is your money....
3. If you borrow money you are paying interest. Who ever told you that may have been talking about the tax benefits which could essentially make it interest free since it would be tax deductible. In reality you would still be paying interest on the money.
4. Hi Chris: Whoever told you that by pulling equity out of one house to invest in another was an interest free loan is big-time wrong. Either that person is out-right lying or the have no idea what it is they are talking about. Either way I wouldn't want that person anywhere near my finances. While it's true you may not have a mortgage on the new property you will still have the equity loan to pay on your original property. Think this one through very carefully. Equity lines aren't always the best way of doing things. Consider the rate and terms of the loan, and by all means re-consider however it was who gave you your information. Good luck.
5. Without specific details ... it's hard to give a finite answer. So, here's a scenario: You take equity out of House A to put down on House B. You still live in House A, & you already have a tenant for House B. Just to keep things simple, let's say the rent you charge on House B (after expenses) more than covers the interest you're paying on your equity-line ... You now have an "interest-free" loan (but, not a free loan). Now, that's just a very simple & basic scenario, but there's a lot of things to consider. Insurance, taxes, maintenance, etc. Good Luck.
6. It is isn't interest free loan..You can either get a regular equity loan which has a fixed rate or an equity line of credit that will have a variable rate until you lock the funds. I work in a bank and have seen people take the equity out of one house to buy another one or pay off a second house, especially if they can get a good rate. Your interest may be tax deductible you there is a possibility of getting a good rate. I would shop around for the best rates...
7. Its not. You will pay interest.