Utilizing Primary Residence Equity for Financing

[Kevin DeBoer]

I've been trying to understand what opportunities there would be to find a lender that would be willing to take a second position on my primary residence in order to finance an investment opportunity. I've been working my way through different institutions and this seems to be a strategy that isn't generally accepted if the loan is in excess of my DTI.

If my home is valued at $2m and my primary mortgage is at $500k then I would think a lender would be interested in anything up to 70-80% LTV. I'm hoping to pull out $800k-$1m to immediately reinvest and allow for this to even function as a cross-collateralization situation, but even though the risk seems much lower than in other types of lending, I'm not seeing a clear path forward.

Am I missing some type of risk associated with this type of investment? Should I be looking at this differently?

Thank you

[Andrew Postell]

@Kevin DeBoer yeah, if this is your primary home then there are federal laws that kick in on it.  Lenders are required to adhere to certain rule and not provide you a loan that you cannot "afford".  These rules don't really apply with investment properties.  Your personal income can be of no consequence on an investment property.  Not so on a primary home.  So, unless the money would come from a private person, who wouldn't follow those federal rules, then all of the other institutional lenders would be stuck as well.  And as mentioned above, if there is income that another lender has missed for you, then maybe that income could be used to help get you a higher "debt to income" threshold.  That would mean that every other lender has already missed it...which might be possible I guess.

Hope that makes a little more sense as to what the issue is.