When it comes to financing investment properties in Boston, such as rental homes or vacation rentals, there are two popular options: a mortgage and a home equity line of credit (HELOC). While both options allow you to borrow money for your investment property, there are some key differences between the two.

Mortgage

A mortgage is a loan specifically designed for purchasing a property. It is a long-term loan typically repaid over a period of 15 to 30 years. With a mortgage, you borrow a specific amount of money upfront, which is used to purchase the investment property. The property itself serves as collateral for the loan. The repayment terms, interest rates, and monthly payments are usually fixed for the duration of the loan.

For example, let's say you want to buy a rental home in Boston for $500,000. You could apply for a mortgage and borrow the full amount. Over the next 30 years, you would make monthly payments to repay the loan, including principal and interest.

Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is a revolving line of credit that allows you to borrow against the equity you have built in your investment property. It works similarly to a credit card, where you have a maximum credit limit and can borrow and repay as needed. The amount you can borrow depends on the value of your property and the equity you have accumulated.

For example, let's say you own a rental home in Boston worth $600,000, and you have paid off $200,000 of your mortgage. You may be eligible for a HELOC of up to 80% of the property's value, minus any outstanding mortgage balance. In this case, you could have access to a credit line of $320,000.

Unlike a mortgage, a HELOC offers more flexibility in terms of borrowing and repayment. You can choose when and how much to borrow, and you only pay interest on the amount you have borrowed. Additionally, the interest rates for HELOCs are often variable, meaning they can fluctuate over time.

Considerations and References

When deciding between a mortgage and a HELOC for investment properties in Boston, it's important to consider your financial goals, risk tolerance, and the specific terms and conditions offered by lenders.

For more information and to explore specific options, it is recommended to consult with financial advisors or mortgage lenders who specialize in investment property financing. They can provide personalized advice based on your unique situation.

References:

1. Investopedia - Mortgage
2. Investopedia - Home Equity Line of Credit (HELOC)