HELOC vs Cross Collateralization
Hello everyone! I recently watched episode #788 of the BP Real Estate Podcast, where Lamon talks about how his bank applied the equity in his first property to fund his second property.
In summary (from what I gather):
-He purchases a home that at 80% LTV (cash).
-When purchasing a new home, he takes out a line of credit to cover the down payment.
-After the seasoning period is up on the second home, he refinances the property and repeats the process.
My questions are:
- Is this process essentially whats called taking out a HELOC? or is Cross Collateralization different?
- Is the bank willing to use the equity in the first home because its paid off or would this strategy also apply to a home that is still being financed?
My situation:
I currently own a condo where the loan is $159k and the estimated appraised value is $273k. Its on the market for $295k. Instead of selling my condo to purchase a second property, could I use a HELOC to fund my next property? In that case I could use the cashflow from the second property to pay the mortgage on my condo.
Please ask me any clarifying questions if you need more context.
Thanks!
Arylle