Home equity as collateral to purchase a new property

[Tracie Soder]

Hello,

Does anyone have knowledge about using home equity (without selling, refinancing, and/or HELOC) to purchase additional properties?

Thank you for your insight!

[Nick Belsky]

@Tracie Soder

Cross Collateralization is likely the method you are referring to.  Essentially, you put a lien on at least one other property's equity that you own against another.  There are quite a few lenders who do this in the private money and hard money world.  The equity you put up counts as cash toward the purchase of another.  A great way to keep money in your pocket if you have property(ies) with equity available to you.  However, this comes with some risks too.

If you default on the loan, all cross collateralized properties are at risk.  Additionally, when qualifying for the loan, you will need fresh appraisals on all properties that will be cross collateralized.  Many borrowers don't expect that one.

Cheers!