Using home equity as a down payment.

[Ducote Kiernan]

I own my home free and clear and I have a real estate deal that looks really promising. I wanted to know if I could use the equity in my home as collateral for the down payment? I don't mean a HELOC or a home equity loan. I guess I mean like putting a lien against my property wrapped up in the purchase loan. I don't know if I'm explaining it adequately but that's the jist of it.

[Derek Dombeck]

Yes. You are just pledging the house as additional collateral. We do this on hard money loans when the assets being purchased are not adequate to secure the loan or if our borrower doesn't have cash to put into their deal. Depending on where you borrow money from, it would be wise to ask them for a stipulation allowing for the release of their lien if certain benchmarks are met. For example,  when a rehab project is gutted and the rehab has just started, the lender has much more risk compared to when it is completed and listed for sale or rent. Perhaps the lender would release your personal home upon completion of the rehab. Its worth asking the question. Good Luck.