How to Get Cross Collateral Home Loans

A cross collateral home loan enables a homeowner to use equity on his current home to purchase a new one. This loan is based on 80 percent of the current and new home's value minus the amount for the current mortgage. The cross collateral loan may be obtained from the same lending institution that financed the first home or from a different lender.

Instructions

1. Determine whether you have enough equity on your current home to qualify for a second loam. You also need to decide whether you'll sell your current home first and then buy your new home.

2. Consider the option to submit The Hubbard Clause with your offer to the seller. The clause is to inform the seller that you'll need to sell your house before you can by his. Although this is legal, many sellers won't accept this type of offer.

3. Allow the lender to put a lien in the first position on both properties. You also need to allow the lender to use 100 percent of the equity on your existing home.

4. Select a lender that makes cross collateral home loans and submit your application. Expect to fill out a loan application much like a regular home loan. A loan representative will contact you to review your options.

Tips & Warnings

• The equity on one house may be divided and used as down payments on multiple properties. This is a short-term solution that investors use to obtain investment properties.

Resources

• Cross collateral loan worksheet