Collateral on investment properties

6 Replies

Is it ok for a direct lender/bank to ask for an equity on a property I already own as a collateral for an investment property even with 25% down?

Thanks 

They can ask for anything.

Personally, I don't see it is reasonable.

Originally posted by @Neil Aggarwal :

They can ask for anything.

Personally, I don't see it is reasonable.

 Thank you Neil

Simo,

Neil is correct that in the investor world lenders can, and frequently do, ask for just about anything.  I know that because I am one!  But, you can always negotiate to try and get better terms, release of collateral when some milestone is achieved or anything else that makes sense.

Paul.

This post has been removed.

@Simo Lachgar

Typically with blanket mortgages all the properties become collateral under the blanket mortgage. If the properties are being financed individually with a reasonable down payment I am not sure hoe they could hold other properties collateral. 

It is part of the process to know all the properties that you own and what they are worth and what the mortgage balance is that you have in the property. The other properties aren't actually used against the mortgage, just the DTI.

Jerry Padilla, Lender in NY (#NMLS 1084877)
585-204-6923

Lenders will try for the most security they can. They will also use boiler plate forms slanted in their favor.

EVERYTHING is negotiable. If lenders tell people it is not then 80% will comply and they will be left with the remaining savvy 20% to deal with.

With 25% down in my view it is unreasonable for them to ask for collateral on your other property UNLESS the property you are buying is a value add type deal that is not stabilized and has more risk for a loan.

Another situation where a lender might request it is if the LTV is 80 or 85% and the metrics are very tight for extra security. There has to be something special about the loan terms or LTV you are getting to want to cross-collateralize. Putting 25% down on a stabilized asset where they want full-recourse and cross collateralization I would tell them to take a long walk off of a short pier! ................. : ) lol JK

Plenty of lenders out there who will do a deal at 75% LTV and not demand that. Now if you are doing an ARV type loan it might be a different story.

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