Can anyone help me? I purchaced my home in 2000 with my husband and kids.Shortly after the purchace of my home my parents moved into my home. I was woundering if I could put up my house as collateral to purchace another house? But still have my mom and dad, sister and her son stay in the old one.
2006-09-02 14:37:31 · 4 answers · asked by Ua 1 in Business & Finance ➔ Renting & Real Estate
I think that you want to take equity out of your present house in the form of a loan, to put a down payment on your new house. the answer is yes.
You may do this in a couple of ways.
#1 You may take out a new first mortgage with cash out, thus paying off your existing 1st mortgage and establishing a new first mortgage. If you can reduce or stay close to your present interest rate, this might be the way to go.
#2 You may take a 2nd mortgage out on on your existing property to make the down payment on your house you want to purchase.This is a good idea if your present interest rate is already pretty low and would not make sense to refinance, the entire 1st mortgage. This will cause you to make two mortgage payments on your present home. This is a common practice so don't get excited about this procedure.
About your parents, sister and her son staying in the old house that is perfectly ok. If they were able to I would get them to enter into a lease or rental agreement with me so as to show income on your present house. (Now if they honor the contract or not is between the family but it would look extremely good)This would put you in a better position in the purchase of your new home.
The old house at this point becomes a rental property and the new house becomes your new owner occupied property. This will lower the rate of your new house since it indicates you will be living in it as your new permanent residence.
You indicated that you were married with children so I assumed that you use your husbands name, thus the contract between you and your parents will have different last names on them.
You know the income documentation that you had to submit the last time you purchased your home, well you have to do this all over again as well as submit the lease or rental contract to your mortgage broker to pre-approve you for your new home.
You will now be the owner of two properties one is called a rental(Non-Owner Occupied)(No matter who stay there) and the other your primary home.(Owner Occupied)
If your parents and sister are unable to pay the mortgage or assist you in paying the mortgage on your old house you will still be required to pay it, so make sure your finances are in order.
I hope this has been of some use to you, good luck.
"FIGHT ON"
2006-09-02 18:02:03 · answer #1 · answered by Skip 6 · 0⤊ 0⤋
The best you could do is get a second mortgage (or a new mortgage if it is paid for) on the old house. The house would remain yours and you could use the cash to purchase another home (that theoretically could be paid off). Technically that would be using your old house as collateral on the money used to buy the new house....however, if you failed to make the mortgage payment...the bank takes the old house...not the new house.
2006-09-02 14:41:22 · answer #2 · answered by tjjone 5 · 0⤊ 0⤋
If you are on the mortgage you are then going to have that on as a debt for the new paperwork. Your ratios will be pretty bad, unless you have a good income to afford two houses.
2006-09-02 14:45:30 · answer #3 · answered by MadforMAC 7 · 0⤊ 0⤋
Too much leverage and iffyness here. don't do it.
2006-09-02 14:44:22 · answer #4 · answered by snvffy 7 · 0⤊ 0⤋