We own a rental propery outright. We owe a substantial mortgage on the home we live in. We want to borrow several thousand for home and rental property repairs and renovations. Should we try for an equity loan on our home...probably only about 10 to 15 thousand there. Or should we get a first mortgage on the rental OR a business loan if possible? This is so confusing!

Sandra:

Comparing two different financing options is not that difficult, you just have to know the price. You did not give me specifics in pricing or structure so I am going to have to make assumptions in your case.

My assumptions are:

1- You only need $10,000 to do the renovations.
2- You can get a home equity loan

I think that for a loan this small you will probably be best served by the one with the smallest amount of up-front fees. The rate kind of becomes secondary {up to a point} because a 1% difference amounts to barely $100 a year. On the other hand, just getting an appraisal and your credit report might cost you from $300 to thousands for the commercial property. This is the reason why a home equity loan sounds appealing. A lot of lenders have programs where the borrower does not have to pay any closing costs. I think that is a good idea.

Of course, this does not mean that you shouldn’t ask around for both options. Shopping for money is much more rewarding than shopping at the mall {at least for me}. Also remember than when I said interest rate was not as important, I meant “up to a point”.

Good luck

I would agree with the previous advice - your best bet is to sidestep the commercial property and secure a HELOC for your current needs. Do you have $10-15,000 of lendable equity, or this is what your projects require?

A commercial loan is certainly possible, but as was already discussed, this will involve costs you can avoid by simply using the equity in your home instead. In that vein, be sure the consider the cost that fees will add to the rate.

Happy hunting!