Would you borrow from a bank or use your own money?

[ottawaman]

Hi, I recently purchased an condo and am required to put down the 20% downpayment



The bank from whom I got the 80% mortgage, offered to let me borrow the 20% from an unsecured line of credit.



However, I also have the 20% downpayment in my cash savings so I pay it off.



Question is, as an investor would you borrow from the bank or use your own money when paying the 20% downpayment.



I hear people say, use the bank's money and take advantage of the tax benefits. I also hear other people say use your own money so you dont have to pay for the interest.



Any suggestions are always welcome. Thank you

 

[LAndersen]

Does it still have positive cash flow if you use the banks money? One questions I would always look at for sure. Also, what are the other conditions from the bank if you do it this way?

 

[RobMacdonald]

That's very surprising that a bank would allow you to 100% finance an investment property, with 20% being unsecured. Typically unsecured funds are not eligible for downpayment verification.



It's difficult to answer your question without knowing more details. If the property still cash flows with 100% financing, then it almost would make sense to use the banks money and use yours for the next purchase.



Is this your first property, 5th, or 10th? You probably don't want to answer that on this forum, but the answer to your question will be different depending on your financial profile, income, and experience as an investor.

 

[Nir]

I would probably borrow the 20% from a nonsecured line of credit assuming reasonable conditions/interest. If I understand you correctly, the bank approved a nonsecured LOC for you.

Then, after closing use your cash savings to pay off your LOC debt.

now you have more available money for your next deals