How can I get a mortgage on a home that was given to me and that I will use as investment property?
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How can I get a mortgage on a home that was given to me and that I will use as investment property?
My grandmother-in-law gave us a house that is worth $85,000. The house is paid off; no mortgage on it. We need to do an addition on our primary residence for my mother-in-law who is disabled. This will cost at least $40,000. I would prefer to keep the home for rental. How can I get money out of this real estate to do the project without having to sell it?
Asked on June 15, 2011 under Real Estate Law, Michigan
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
What you're describing is a home equity loan (if it's for a fixed amount) or a home equity line of credit (if it's for a variable amount you can draw upon at will, up to the limits)...or alternately, if you will not be living in the home but primarily renting it out, it might be a business loan or line of credit backed by the home as security--a commercial mortgage, just not a purchase money mortgage.
Banks have many products that may help you. You should discuss this situation with some local bankers, especially any you may know personally. Find out what amount of money is reasonable to borrow, what terms you can get, and what you need to do to qualify for it...for example, if you are going to rent the home out, you may need to come up with a business plan, with comps to show what you could rent it for, a cash flow analysis, etc.
Short answer though: what you ask for is fairly common. It's just a matter of finding what you can qualify for, based on the economics, market, and equity, and also what hoops you need to jump through to get it.
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