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Use refinance proceeds to improve another property?

I am closing on a home in a week. I also own another condo that has significant equity. I want to refinance the condo and use some of the equity for improvements on my new home. Is this feasible?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

As long as you qualify for the mortgage on your condo, there is nothing that would prevent you from refinancing the mortgage and using the proceeds to do landscape improvements on the home you are buying.

There are several points you should keep in mind as you consider refinancing your condo. First, you should wait until the mortgage on the home you are buying closes before you start the refinance process on the condo. Second, the refinance lender will take into account your mortgage payment, property tax and insurance on your new home in determining your ability to qualify for the refinance on the condo. Third, it can be tricky to get a mortgage on a condo as there are specific regulations lenders must follow.

We provide a great overview of what you need to know when you get a mortgage on a condo. Finally, the terms for the condo refinance will be different depending on if the condo is an investment property or second home. We also provide a helpful summary of investment property mortgages.

One idea that you may want to discuss with lenders is getting a home equity loan or line of credit (also called a HELOC) instead of refinancing. This may allow you to borrow only the amount of money you need for the landscape improvements which can save you a lot of money in the long run. We provide an extensive comparison of refinancing versus a home equity loan to help you understand the pros and cons. Please note that not all lenders will offer a home equity loan on investment properties so you may have to contact multiple lenders, including credit unions which specialize in these types of loans.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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