CanI use a property that is not yet fully paid as down payment to buy another property?

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CanI use a property that is not yet fully paid as down payment to buy another property?

Asked on July 20, 2011 New Jersey

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Potentially yes as to a cross collateral security for a loan to buy a second property. For example, if you own real property that is worth $250,000, but owe $25,000 which could be paid down completely in 5 years, you could possibly make an offer to buy another property subject to certain conditions.

In this example, you could offer the property owner you want to purchase from a certain sum and request that he "carry back" the purchase price of the sale through a promissory note and mortgage that could be recorded on the property you have not yet fully paid off. However any mortgage placed on your existing property being paid for would be junior to the presumed mortgage you are paying on in this example.

This is not the best situation for any lender/seller in that all lenders want to be in a first secured position on a collateralized item in case of a default on the obligation.


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