ZERO DOWN Investment Strategy 2 : Power of the Bank
On the other hand, a typical investor will view their relationship with bank very much differently. Bank is their financial sources to increase their wealth by borrowing and through refinancing. How does this work ? This strategy require you to own a house either under your name or joint name, irregardless whether the property is already fully paid up or still under mortgage.
- Let say you bought a house in 2008, and is worth 350K, with 90% margin of finance, you will have a mortgage loan of 315K.
- Due to the property price hike, the same house would have appreciated to around 450k in 2011.
- If you refinance the property, with 90% margin, your new mortgage loan is 405k.
Now, there is a new , tax free investment capital of 80k* generated through the refinancing process.
* The 80k cash is derived from 405k(new loan)-315k(existing loan)-10k(misc fees)
With this, a new property could be purchased with the 80k cash available, without taking out a single capital from your pocket !