Q. I would like to buy a second house to rent out. My income is very low, but I have no debts, no mortgage on the home I live in, and some savings and an IRA. Should I get a mortgage on the house I want to buy or finance the purchase with a second mortgage on the house I currently own and live in?

A.There are two good reasons to get a mortgage on the rental house.

The first is that mortgage rates are very low right now, considerably less than what you'd pay for a home equity loan. While you will pay a slightly higher interest rate because you're buying a second home, a mortgage would still be the cheapest way to finance your purchase.

The second reason is that your home is paid off. So why put it at risk? If you use money from a home equity loan to buy the rental house, and something goes wrong, you could lose both properties.