Do you own a home with substantial equity and dream of buying a second home—maybe a vacation spot at the beach? You’re not alone. Many homeowners across the country have gained tens (or even hundreds) of thousands of dollars in equity thanks to rising property values. The good news? You can use that equity to build more wealth by purchasing a second home.
As a mortgage broker based in Charlotte, NC, I’ve worked with many homeowners looking to turn that equity into opportunity. In this post, I’ll walk you through how to leverage your existing home’s value—without sacrificing your low mortgage rate.
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Why Home Equity Matters More Than Ever
If you bought your home within the past few years, chances are it has appreciated significantly. In Charlotte, for example, home prices jumped over 20% in just one year. That’s created a unique opportunity: homeowners now have access to large sums of tappable equity—and many want to use that to buy a second home.
But most people think a cash-out refinance is their only option. In today’s rate environment, that might not be the smartest move.
The Better Option: Home Equity Line of Credit (HELOC)
Instead of refinancing your entire mortgage (and losing that low fixed rate), a smarter solution is to take out a home equity line of credit (HELOC).
Here’s how it works:
- You keep your existing mortgage.
- A bank or credit union offers you a line of credit based on your home’s current value.
- You only pay interest on what you use.
- Most HELOCs offer interest-only minimum payments, giving you flexibility.
Some lenders—even ones I’ve worked with personally—may lend up to 100% of your home’s value (minus your current mortgage). More commonly, credit unions will go up to 90% if your credit score is solid (720+).
Example:
If your home is worth $800,000 and you owe $600,000, you could qualify for a line of credit of up to $200,000—giving you immediate access to funds for a second property down payment.
How to Use the Funds to Buy a Second Home
Once you’ve secured your HELOC, you can use the funds as a down payment on your second home. Most people aim to put 20% down, but you can go as low as 10% (just know that comes with mortgage insurance and possibly a higher interest rate).
To qualify for the second home mortgage, lenders will consider:
- Your current mortgage payment
- Your HELOC payment (at least the interest-only portion)
- Your projected second home mortgage payment
If your income supports all three, you’re set. You now own two appreciating properties, building wealth through smart leveraging of your home’s value.
Final Thoughts: Build Wealth with a Smart Equity Strategy
If you’re thinking long-term and want to expand your real estate portfolio without giving up your existing low-rate mortgage, a HELOC can be a smart move.
To recap:
- Avoid cash-out refinances if your current rate is low
- Explore a home equity line of credit instead
- Use those funds as a down payment on your second home
- Ensure your income supports all related payments
With the right guidance and planning, you can use your home’s equity to create new opportunities—and potentially build generational wealth through real estate.
FAQ: Using Equity to Buy a Second Home
Is a cash-out refinance ever a good idea?
In some cases, yes—but only if current interest rates are favorable or if you’re consolidating other high-interest debt. Otherwise, a HELOC is often better.
How much equity do I need to get a HELOC?
Most lenders require you to have at least 10–20% equity in your home after subtracting your existing mortgage balance.
What credit score do I need to qualify for a HELOC?
Generally, a score of 700–740+ will open up better HELOC terms and higher loan-to-value options.
Can I buy a second home with just 10% down?
Yes, but you’ll likely pay mortgage insurance and receive a slightly higher interest rate. A 20% down payment typically gives you the best terms.
Do I pay interest on the full HELOC amount?
No. You only pay interest on what you draw (use), not the total line of credit.
Want to know if you qualify for a HELOC or second home loan? Contact me today to explore your options and create a personalized plan.
