Posted by Smith on October 26, 2002 at 15:15:41:
Excellent alternatives. The line of credit will typically be at a higher interest rate, but maybe not high enough to worry about.
you are correct, a collateral release clause on a second of this type is very important.
no down payment technique - Posted by Jay
Posted by Jay on October 24, 2002 at 11:04:17:
did any one try this technique, putting equity of another house,as a down payment for a house.? I asked a mortgage broker, and he said he thinks it cannot be done. because the bank wants to see, you are interested in the deal. so by putting down some cash, you are
Jay
Re: no down payment technique - Posted by Sean
Posted by Sean on October 25, 2002 at 13:53:19:
It’s a good idea, if you can get a bank to go for it. Most banks won’t.
You’re better off signing a lease-option with the seller and giving him a note and deed of trust against your other property for ‘option consideration’
You could run out the very next day and exercise the option but, if you negotiated the lease-option well, you should probably wait awhile.
Re: no down payment technique - Posted by GL(ON)
Posted by GL(ON) on October 24, 2002 at 11:18:45:
There is no reason not to do this. The bank won’t mind because you are putting up something of your own - your house. Ask him if he thinks you want to lose your own home? You will do everything to make sure that doesn’t happen.
The one flaw is, if you tell them about this mortgage they will want to know that you can afford the extra payment. If you add it to your other payments do you still have enough income to carry it? Then you OK.
Re: no down payment technique - Posted by Jay
Posted by Jay on October 24, 2002 at 12:23:15:
Thank you. but the other house, is an investment property as well. and about the payments if I show them that the property will generate money, will it be enough for the bank?
Jay
Re: no down payment technique - Posted by Smith
Posted by Smith on October 24, 2002 at 12:44:12:
Jay, you may want to read the following thread from the financing forum:
http://www.creonline.com/real-estate-financing/wwwboard6/messages/6335.html
Using collateral from one property to buy another is an excellent strategy when you can get the lender to go for it. It’s more common to do this in an owner-financed deal, but if the numbers are good, an institutional lender could probably be found that would cooperate. Money is very easy to borrow, now, so make hay before rates and requirements go up. If your current lender won’t do it, try a smaller local bank or S&L. Don’t give up searching until you get what you want.
As far as the property income paying for the debt service, lender will typically give you a 75% allowance for a rental. In other words, 75% of the rent will be allowed to balance the mortgage payment when your debt to income ratio is calculated. If the house is sold on land contract instead of rented, a lender may give you up to 100% credit for the incoming payment against debt service.
However, there are other ratios that must be met besides your debt to income ratio. Your lender can explain.
Re: no down payment technique - Posted by jafon2k
Posted by jafon2k on October 26, 2002 at 07:57:20:
If the properties have equity find a bank that will provide equity line of credits (line of credit has check writing priveleges, which differs from a regular equity loan). Then write a check for the downpayment. Put enough down by this means to qualify for a no-doc loan and debt ratio will not be an issue. Saves on mortgage expenses, etc. Saves on the rhetoric also.
If you do encumber the property with a mortgage be sure to include a collateral release clause in the contract.