Combine Two Properties In One Mortgage?

June 18, 2001, Reviewed January 28, 2011

"My condo has appreciated greatly in value, and I am about to buy a house which will be my permanent residence. I will rent the condo. Is it possible to use my equity in the condo as the down payment on my house by combining the 2 properties into one mortgage?"

Yes, it is possible. However, it isn’t done very often, because borrowers seldom find it advantageous and lenders dislike the complexity.

In your case, the lender would be combining a property that will be used as a permanent residence and a property that will be used as an investment. Loans on investment properties are viewed as riskier and carry a stiffer price. A lender willing to do this loan will almost certainly price it as an investment loan.

This means that if you take out a combined loan, you will be paying a premium price to finance your home purchase. In addition, your ability to sell the condo in the future will be severely hampered. To sell the condo, you must pay off the entire loan, which could force you to sell your home as well.

You would be much better off taking out a home equity loan on your condo for the amount of the down payment on your home purchase. An alternative is a "cash-out" refinance where you refinance the loan on the condo for an amount equal to the loan balance plus the down payment on the new house.

Both of these options would be less costly, and you would retain your freedom to sell the condo.

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