Reply to Can we use equity as down payment to buy a second home?

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[quote=Anonymous]You cannot get that equity out of the house unless you take a HELOC or refi your home.  If you refi and take money out, your mortgage payment will go up.  You don't get to keep the equity in the house and use it as a down payment for another house.  Only one bank/loan can be using that equity at a time.  If you have that equity in the first house, then it is just paper money and doesn't actually exist.  If you take the money out of the first house to make the down payment on the second house, then your equity in the first house goes down and your mortgage payment goes up to compensate for less equity.  But then you'll have the liquid equity assets to put down on the second house.  But you'll have two mortgages.  Most banks will not give you a second mortgage unless your income specifically allows you to pay both mortgages without rental income since you have no history of rental and no proof that you can rent the house.

The only alternative you have to do this is you have to temporarily rent another property (whether a condo, townhouse or SFH) and move into that property.  Then you can move into the rental and rent out your first house.  Once you have a renter in the first house with a lease for at least one year, then you can establish history and proof that you have guaranteed rental income on the property for at least one year and then they will allow you to refi the first house, take out equity, and apply that equity to another mortgage to buy a new house.  But you'll have to be able to afford the first mortgage and the temporary rent until you actually close on the second house.  If you are getting rent from the first house, you can apply that rent to your rent of the temporary place while you get the second house purchased and closed.[/quote]

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