How to use rental for collateral on loan for new primary home?

How to use rental for collateral on loan for new primary home?

Member since 2019 · 48 posts · 13 votes

Hello, looking for some advice about how to use my rental home as collateral for a down payment on a primary residence.

The rental we own is in Missouri, worth about $120k, and we own it free and clear.  We also own a primary residence worth about $260k in Austin, TX area and a vacation home further south worth about $180k, with not much equity in either of those.

We would like to move to a different primary residence because we ran across a home that would work much better for our family (huge backyard for the kids, better location, etc).  I would like to keep the home we live in now as a rental.

The question is, if we want to be able to purchase this new primary residence we need to use the Missouri home by either 1) selling it as quickly as possible and hoping that the house we want doesn't sell, 2) put the home up as collateral for a loan for the new primary residence (I don't know if this is even possible) so we can get financing going faster, or 3) hoping some of you have other creative options that would allow us to make this move pretty quickly.

I know the red flag that's popping up for many of you is the fact that I want to do this quickly.  That aside, does anyone have ideas about how to put an offer in on this new residence and use the equity in my paid-off rental for a down payment, quite possibly before I am able to sell it?  There also may be an issue of debt-to-income ratio if I buy another house.

Hope this makes sense.  Thanks in advance for your help!

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  • Mike WebberPro Member
    Real Estate Agent · Reston, VA · Member since 2020 · 84 posts · 53 votes
    6y

    @Ben Ashburn

    Hmmm, how much is the new home you want to buy?

    Could you get a cash out refi on it w a 30 year or something w a crazy low payment so it still cashflows like crazy but you have a solid down payment?

    Worst case, you could probably just put it up for sale houses are going so fast right now.

  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    6y

    Start by pulling your credit scores, such as with MyFICO. Call local lenders and ask, with zzz score, what rates can I get for a new owner occupied house? Explain your plan. Do not let them pull credit until you find a lender who understands what you plan. Credit unions and small community banks tend to be most flexible.  

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