That would mean you had $100,000 in equity in your house.
But because it’s part of a mortgage, you will typically get a better interest rate than if you were to use a credit card or hard-money loan to fund the same purchase.
And, if you’re refinancing to a higher mortgage rate, you could wind up paying more money in interest on your loan over the long run.
Home equity loan or line of credit If you’ve built equity in your primary residence, you could tap a percentage of it using a home equity loan or home equity line of credit.
Both financing options let you borrow money using the equity in your home as collateral.
The big difference is a home equity loan provides you with the cash upfront, and you pay monthly installments over the length of the loan (like you do on your first mortgage).
Since you’re getting all the cash upfront, a home equity loan is generally a better financing option when buying and flipping a house.
Most mortgage lenders will allow you to borrow up to 80% of your home’s equity on a second mortgage.
(Read: If you’re a high net worth investor, or own a portfolio of properties totaling over $1 million in value, an investment line of credit might be your best financing option for a single-home or multihome flip.)
Interest rates vary from 8% to 11%, with the average loan term on luxury flips being 12 months.