Using Property As A Down Payment?
Here is my question: I am a bit over extended with my debt to income ratio.. But I have heard that it is possible to ask a mortage to release a lot . My situation or idea is this.. I have a rental in a small town that I own 3 lots, each with there own deed. My question could I go the mortage company ask them to release the deed to one of the lots and then turn around and use the pay off deed to use as a down payment for another rental house?
If this is possible, how would I go about it?
Thanks
Justin
Justin,
If I understand your post, you own three lots that are separate parcels but are under a single mortgage. Assuming they are of equal value, you are proposing paying off one third of the outstanding balance and in turn the mortgage company will release one of the properties so you can use the parcel as a down payment.
I am assuming that the value of the land is significantly more than the loan balance, otherwise you would take the money you would use to pay down the loan and use this money for a down payment on a property you wish to acquire. Whether the lender will do this is unpredictable, however, it sounds like a reasonable request. Certainly one way of doing this is to get a new loan secured by the two remaining parcels and use the proceeds from the refi along with your pay-off money to pay off the original loan and you will have the result that you want.
Using land for a down payment has been a mainstay of creative financing for a long time. In the good old days people would purchase the land at a discount and then use it at market value for a down payment to acquire a property "below market". If you can find someone motivated enough to accept land as a down payment, you have it made!
You are thinking along the right lines for making deals happen. Keep it up and keep us informed.
Regards,
Ed
Moved. Commercial side is for 5 Families and up.
midnightgirl,
I did not see any maintenance and repairs in your expense list. I did see an Association Fee. Are these condos/coops or is this a neighborhood association fee. The key question is whether or not maintenance is covered. A four unit building is likely to have a reasonable amount of maintenance and repairs although at only nine years old it may not be too bad. You should get maintenance and repair data from the sellers. This is one area where you need to "trust, but verify".