Assume that I want to buy a non-owner-occupied property worth $200k. Also assume I own a $800k property with a $300k mortgage on it (thus, it has $500k of equity).
If I was willing to pledge both the new property ($200k) and give the bank/lender a second mortgage on the owned one ($500k in equity), what would be the lowest down payment I could provide on the new ($200k) property?
I'd like the down payment to be 5-10% because obviously that improves the ROI of my project. From googling, it looks like the down payment will still need to be at least 15% but I don't understand why that is so: with all this collateral, the bank will easily recover all accreued principal, interest, and fees if I do not keep paying the mortgage.
Have you checked with lenders regarding a second on the 800k property for the full 200k or refi cash-out the 200k? Then the second is free and clear with no out of pocket.
I am not sure if a lender would simply take a pledge on your home as guarantee. You would be better off with doing a cash refi of your homestead or getting a HELOC to cover the down payment.
Look into FHA and HomePath loans. They have small down payments (though FHA carries permanent PMI).
Make sure that your property not only provides a good cash on cash return but that it can cash flow with such a high mortgage.
In that situation Id be talking to local portfolio lenders. I wouldn't think youd have to put a dime down....not even closing costs if your a solid risk and find a decent small bank.
If your $800k property is owner occupied, you should be able to get a HELOC that would allow you to purchase the property outright and would probably give you a better rate than a mortgage on a non-owner occupied property.
I think Justin Harris Has a good point and I wished you the best and please let everyone know how it worked out?
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