Cross Collateralize Free and Clear Property to purchase 4 unit

[Ray Thorsen]

I am writing an offer on a four unit tomorrow in south east Wisconsin. I am looking for the most economical way to leverage a free and clear duplex I own (worth appr 120k) to cover the down payment (appr 35k). Obviously I can cash out refi it and get conventional financing. But then I have to pay closing twice. Unfortunately the private lender I had has stopped lending which would have made this easy. I am  wondering if there are any banks or hard money lenders in the MIlwaukee, Kenosha, Racine area that would do a cross collateral loan and if there fees and terms would be more economical than the traditional route. Thanks BP nation for any help on this.

[Marcus Auerbach]

@Ray Thorsen Yes, you can do that, most small banks with focus on business will do that. 

However, here is the catch: If you cross collaterize you will end up with a 5 year commercial ballon product with higher rates. Often amorized over 20 or 25 years. That means less chash flow. And then in 5 years you'll have to look for another loan, most likley in a higher interest rate environment! The best loan by a long shot to buy the 4fam is a 30 year fixed secondary market product with low interest rates and a 30 year amortisation. 

Keep it simple and focus on low interest rates and long terms, get a 30 year cash out refi on the first one and then put down 20% on another 30 years fixed rate low interest note.