Why are lenders willing to accept a downpayment with borrowed money?

[Aleko Petkov]

I am familiar with the strategy of refinancing one property with cash out and using the cash to pad the downpayment on another property, but I don't understand why this works. If 50% of your 20% downpayment is borrowed, how is that different from just putting 10% down?

[Darrell Shepherd]

Because the bank's risk of taking a loss loaning you 80% of a house is way less than loaning you 90% of a house if you fail to pay.