Profile picture for JohnPrincinsky

Using home as colateral instead of down payment for investment property

So, here's a quick rundown of the situation:

Economy tanked and messed with my credit some, but I've managed to pay off all of my accounts. This, though, has left me with no debt (and no credit) with 5 or so negative items (that were paid off).

To help pay the bills, not quite 2 years ago I turned my house into a rooming house and have made money renting rooms from it.

Now I have found a fair deal on a rental property which I would like finance, but I don't have a cash down payment.

I considered taking a mortgage on my current home (which is payed off) and using that as the down payment, but would rather not have 2 seperate loans out. Is it a possibility to use my current home (which is worth about 30% of the asking price of the other rental) as collateral to be able to close a loan?

Or what other possible options are there to be able to make this deal happen? There is enough room in the NOI to finance with hard money, but of course the terms are not very favorable.
  • September 11 2013 - US
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Answers (4)

Dear John:
If you are looking to finance an investment property, the lender guidelines are more strict and will not accept any investment from your homestead property. Your options are very limited and a private lender looks more likely to be your answer. However, private investor will require a larger down payment which you can get from your property as a line of credit and the good thing is that they do not required the borrower to have any credit at all. I hope you find this information helpful.
  • September 11 2013
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Profile picture for larryeul
Hi-

 What you are really looking for is 100% financing... not gonna work.

  Find a seller with a lot of equity.. maybe you can get a 80% mortgage on new property, have seller hold 20% of sales price as a note on current property..yeah, you got two mortgages, but whether you owe, as ex: 80 on one property and 20k on 2nd prop, or 100k on one property, you still owe the same. You know?

  Credit also going to be an issue.

Best to you.
  • September 11 2013
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That's not going to happen, John. 
  • September 11 2013
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Hi...I'm not familiar with your Real Estate laws in the state that you are in...You could do it -if it is a for sale by owner or have the agent speak to the seller to use your home as collateral.  Most likely, they will not because they want money upfront - but you never know....if the seller is an investor then a risk like that would not affect him.  It just depends on the Seller situation and if he is willing to do owner finance.

Hope this helps...Have a great day!!
  • September 11 2013
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