How to use equity from one rent house to buy another?
May 18th, 2010 by admin
If
House ‘A’ is paid off and now a rental property; and
I live in House ‘B’ with very little equity…
Is there a way to borrow against House A for the down payment of another investment property in Texas?
Also-
What’s the deal with TX cash out laws?
Would it be better to put a second mortgage on my current home?
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You should be able to go to a bank and take out a mortgage against the equity and use the loan to buy the next investment property.
Sure you mortgage house A and use the money as payment for house C
Yes. But your chances of doing so in the current mortgage environment are not great.
It may be doable but it will depend on your mid score and what LTV you need. You also have the TX cash out laws to deal with.
Edit: TX cash out laws restrict the future lending options after you pull cash out. Once the initial cash out is complete the title on your home will forever show that you did a cash out refi and every loan after will be considered cash out. In addition you will be prohibited from getting various types of loans.
You can theoretically do so but keep in mind that you must have so much equity in each rental property. In Michigan, you must have at least 30% equity in both rental properties after it is all said and done.
What I would suggest is to figure out what the percentage is where you live. Then I would figure out how much down payment I would need on the new rental property to fulfill that percentage. After you figure that out, see if you can take an equity line out on your first rental for the amount that you need and still maintain the required level of equity in it. After you have done all of the math and you can fulfill the requirements, obtain a pre-approval for the new rental property and open up the equity line of credit on the first rental to supply the down payment. The down side is that you’ll have two payments, but the upside is no money will come out of your pocket.