You can either get a mortgage or home equity loan. The issue is that they do not like to count rental income in payment of mortgages, and instead will look at your other income. There will be closing costs of documentation and a bank appraisal and the closing costs will vary by lender.

In theory you could borrow $252,000 if the payments were OK at up to 30 to 35% of your gross income excluding a rental property. You might then buy the rental property for cash, and in the USA, your mortgage interest would be deductible as a primary home loan.

A loan on the rental property is also deductible to the extent of income of rent and other expenses and the depreciation of the rental house (but not its land). It is all a matter of what your income is for a bank to decide that you can pay the mortgage.

Meet with a lender or two and have your income information and other debt that you should not have any other debt really.

Hi there,

I was just hoping you could give me some information on getting a mortgage on our current home which is finance free. Basically what we want to do is rent out our current property and release equity on it to buy a second property. The rent will cover the mortgage. Our current house is worth 315000, how much equity would it be possible to release? Also regarding a deposit, would our house be the deposit or would we need a cash deposit?

Any advice you could give would be great.