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From: Mike .
Security/collateral
From: Jim
Date: 22 Jan 2001
Time: 21:19:34
Hi folks. I hope someone can help me understand when banks ask for security when you buy a property. I have been having a debate (some would call this argument ) with my wife regarding this.
Pardon my ignorance on the way I say things below, but I'm fairly new to investing.
If say I have a home worth $200K and fully paid off, then this would be my equity. Right? What I would then be inclined to do is to start up a new loan of $160K (ie 80% of my equity). The security held against this loan would be my home. Correct?
I now decide to buy a property worth $300K, so one would think that a bank would lend you up to 80% (sometimes more, but let's stick to 80) which would be $240K. The remainder of the 20% ($60K) I would source from the new loan I have just started, leaving me with a balance of $100K. I can then continue to buy properties in the same fashion sourcing my deposits from the loan I originally opened from my equity.
My question is, would the bank hold security against my existing home on these properties I purchased? Up to what percentage would a bank lend you without them requiring any security?
My wife and I have been talking to a few lenders this week, and they have given my wife the impression that they always require security. I believe that you can buy a property without offering any security. I have heard that a bank, given the chance, would try and hold some sort of security if they could no matter how much they lend you. How should a smart investor handle situations like these when negotiating with banks?
Thanks for any responses.
Regards, Jim.
Security/collateral
From: Jim
Date: 22 Jan 2001
Time: 21:19:34
Hi folks. I hope someone can help me understand when banks ask for security when you buy a property. I have been having a debate (some would call this argument ) with my wife regarding this.
Pardon my ignorance on the way I say things below, but I'm fairly new to investing.
If say I have a home worth $200K and fully paid off, then this would be my equity. Right? What I would then be inclined to do is to start up a new loan of $160K (ie 80% of my equity). The security held against this loan would be my home. Correct?
I now decide to buy a property worth $300K, so one would think that a bank would lend you up to 80% (sometimes more, but let's stick to 80) which would be $240K. The remainder of the 20% ($60K) I would source from the new loan I have just started, leaving me with a balance of $100K. I can then continue to buy properties in the same fashion sourcing my deposits from the loan I originally opened from my equity.
My question is, would the bank hold security against my existing home on these properties I purchased? Up to what percentage would a bank lend you without them requiring any security?
My wife and I have been talking to a few lenders this week, and they have given my wife the impression that they always require security. I believe that you can buy a property without offering any security. I have heard that a bank, given the chance, would try and hold some sort of security if they could no matter how much they lend you. How should a smart investor handle situations like these when negotiating with banks?
Thanks for any responses.
Regards, Jim.
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