I recently moved to Boston where housing is very expensive compared to where I lived before. Buying a house requires a lot of money as down payment, and I am still short of $30000-$40000. But I have a house which is now a rental house and I can apply for home equity line of credit from it. Can I use that money to make a down payment on a second house in Boston?
Can you ? Yes.... probably. It depends on the equity you have in the existing house and the down payment you need for the new house and your debt to income ratio and a few other things.
Should you ? Probably not. HELOC likely has far higher interest than a mortgage would. There's a reason why banks don't want you to get a loan for a down payment.
Alternative: Cash-out refinance the existing house, then apply for a new mortgage (and/or wait 6 months+ in between). If you can't get enough money from the equity in your current home to make the down payment you likely wouldn't get approved after the HELOC either.
Yes you can raise funds for down payment of new house by obtaining finance against your existing property. But you need to look at your Debt Burden. You may face difficulty in obtaining required credit limit for new house finance once you avail finance against your existing property.