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Can you take a house you presently own and use it as a down payment for a new one?

Own our home free and clear. Would like to keep it to use as rental property. Can I use my home as collateral for a home loan? If so, how does that process work? 
  • February 28 - Soddy-Daisy
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Answers (6)

There are some great options for your situation. I would recommend doing a cash-out refinance. This would allow you to free up some cash that you can use towards the down payment of your next home. It is common for people in similar situation to go the cash-out refinance route. The best thing for you to do is to speak with a knowledgeable lender to see if you can get started on financing a new home. If you need additional assistance, feel free to reach out. Good luck!
  • February 28
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You can obtain a HELOC for the cash down payment of another home.  You would then have a personal loan against your paid off house and a mortgage on your new purchase.  Depending on any other credit issues would also have a bearing on whether you can purchase a second home.  You could consider VA if you are a veteran or your spouse is a veteran.  Another option is USDA.  If the home you want to purchase in in a rural area that qualifies.  There are some other restrictions for example which home are you going to occupy as your place of residence.  Remember that stating you are going to occupy a home for the purpose of getting a mortgage and not doing so is fraud and could land you in some serious legal challenges.  My point is be honest.
  • February 28
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You won't be able to use it as collateral, but you can take some cash out of it, if needed, for downpayment and closing costs to buy a new home.  You can take the cash out with either a home equity loan or line of credit, or you could take out a regular new 1st mortgage against it.  If you would like some quotes for any of these scenarios please feel free to contact me. Click on my name to go to my profile for my contact info.  I am in west Knoxville but lend all over TN and have been doing mortgages for 18 years.  Good luck!
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Profile picture for Jason Muse
Your home could be used for a "cash out" refinance or find a local bank and ask about a HELOC.  (Home Equity line of Credit). If HELOC'S are offered in your area.   Best of Luck
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No you cannot use your home as collateral for a loan.  You could refinance and get cash out of the refinance.  If you have a family member who is currently serving in the military you could get a zero down loan. 
  • February 28
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It can be tricky but if they close same day and the loan officer structures the closing properly it can and has been done. Both will fund same day but I would contact your loan officer or try and find one that has done this before.

Good luck and best wishes!
Scott
  • February 28
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