Living in Texas, can one use equity in rental properties as downpayment for primary residence?

[LegalHelp123]

I currently have a real estate portfolio, job and am working remotely. As such, I rented out as well what had previously been my primary residence.

As i have been in and out of the country I've stayed with family when in the country.

Now I am planning to be back state side longer term and am looking to purchase a property as my primary residence, but would need access to the equity in the home for a downpayment.

Is this possible? Does the "A6" form come into play? I am not sure off the official designation. Maybe Form 50(a)(6)?

 

[Tax Counsel]

[QUOTE="LegalHelp123, post: 347376, member: 137029"

Now I am planning to be back state side longer term and am looking to purchase a property as my primary residence, but would need access to the equity in the home for a downpayment.[/QUOTE]

There are several ways you might make use of the equity in the rental to use as a downpayment for your home. But whether your current rental lender and your prospective home purchase lender will be willing to do anything is impossible to say. Some mortgage firms are more risk adverse than others. You'd need to contact a couple of mortgage lenders to see what kinds of options they would accept.

 

[adjusterjack]

I'm scratching my head here.

When I think of using equity as a down payment I think of converting the equity to cash either by borrowing on the house or selling the house.

What else do you have in mind?

 

[Tax Counsel]

I'm scratching my head here.

When I think of using equity as a down payment I think of converting the equity to cash either by borrowing on the house or selling the house.

Some mortgage lenders won't go for an arrangement where the down payment is funded by some other debt. Doing that does increases the credit risk of the borrower over a simple cash downpayment because there is now a new debt that must be paid along with the mortgage.

What else do you have in mind?

The other common possibility is to cross collaterize the loan, e.g. give the home loan lender a mortgage on the buyer's interest in the rental property along with the mortgage on the house the buyer is purchasing. That doesn't increase the credit risk of the buyer nor does it change the buyer's investment in the partnership, but it does give the bank additional property to go after in the event of default.

 

[LegalHelp123]

I'm scratching my head here.

When I think of using equity as a down payment I think of converting the equity to cash either by borrowing on the house or selling the house.

What else do you have in mind?

the thought would be to access equity in houses that have tripled in value and are largely paid off to use towards down payment on the new house.

Convert some rental equity to cash (while retaining the property) and then use that cash to purchase the new house (which would be primary residence)

 

[adjusterjack]

Convert some rental equity to cash (while retaining the property) and then use that cash to purchase the new house (which would be primary residence)

Which is what I did with my house and a rental years ago. I got a refi on each and used the cash to buy my next house, except that I didn't need to get a mortgage and I sold the other two as soon as I moved, then paid off the loans. After 20 years I had my fill of landlording.

If you are using the cash to make a substantial down payment (30% to 50%) and your debt to income ratio is low, you might be able to get a new mortgage fairly easily.