Using home equity as down payment for another mortgage

[wackajala]

Hi all. As the title suggests, is it possible to use the home equity in one property as the down payment in a mortgage for a second property?

I'm wondering specifically if issuing banks have some mechanism for this or if I would in effect be getting a second loan on the equity of the house and then giving that money to the issuing bank for the second mortgage down payment.

[Meach7]

As far as I know you can use a cash out refinance for funds for a down payment on another property, but not any type of loan product. 

[MortgageMama]

We need a little more information, please. Let's say Property #1 is your current residence and Property #2 is your next purchase...

Do you intend to occupy #2 as your primary residence?

What do you intend to do with #1? Sell it or keep it as a rental/investment property?

And yes, what is called a Bridge Loan is available (although not by many lenders). It's designed to help you purchase a new property by tapping into the equity on your current home in order to buy #2. There are limits to how much equity you can pull out of#1 in terms of a percentage of the value (LTV). Bridge Loans are generally short term loan and you would still need to qualify for the entirety of all the mortgages for #1 and #2.

If you do intend to sell #1, I realize it's a challenge to coordinate a sale and a buy, but it's quite possible to work out a closing on #1 and #2 same day. 

[wackajala]

Thank you for the responses I appreciate it.

the intent would be to live in #2 and turn #1 into a rental. I don't want to lose #1 due to the favorable rate when we bought it a couple years back.

I will take a look into the bridge loan that you mentioned here.

[ShanetheMortgageMan]

Keep in mind most bridge loans are 1st mortgages only, meaning you'd have to pay off your existing mortgage on property #1 with the higher rate bridge loan.  There are 2nd mortgage bridge loans but aren't as common.  Most bridge loans require a significant amount (%) of equity in the 20-30% range after funding.

[ShanetheMortgageMan]

I read in your other post that you have a significant amount of equity in this property, which may allow you to be in a position to qualify for a traditional 2nd mortgage or HELOC on an investment property rather than having to obtain a bridge loan.  Those will be much easier to qualify for and you could retain your existing 1st mortgage terms.

[MauiMan85297]

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@ShanetheMortgageMan wrote:

I read in your other post that you have a significant amount of equity in this property, which may allow you to be in a position to qualify for a traditional 2nd mortgage or HELOC on an investment property rather than having to obtain a bridge loan.  Those will be much easier to qualify for and you could retain your existing 1st mortgage terms.

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And you can use this line of credit for down payment/costs of the new purchase, so much easier than a bridge loan.