Purchasing a Home with No Down Payment
by
Gregory Grant
With home prices sky high, the average 20 percent down payment on a home can be an astronomical sum of money. But for those who qualify, 100 percent mortgage financing may be an option. 100 percent mortgage financing allows homebuyers to purchase a home based on their investment portfolio -- in lieu of a cash down payment.
"In order to obtain 100 percent financing you must first be able to qualify under whatever the value of the real estate is," said James Cotto of Merrill Lynch. "Then you must pledge 38 percent of the value of that real estate and deposit those assets in a pledge account. Upon closing the mortgage you are able to reduce the pledge account value to 25 percent."
100 percent mortgage financing is perfect for homebuyers who have highly appreciated assets they don't want to liquidate -- and buyers maintain full control over the pledge collateral account.
"The assets placed in a pledge collateral account are not frozen, you are able to do transactions, buy and sell, receive dividends, receive income, realize capital gains," Cotto said. "The account must be maintained at a 25 percent level. And upon the selling of the house, the assets revert back to the owner."
100 percent mortgage financing is especially attractive to savvy investors. Rather than liquidate assets to make a down payment, they can purchase a home and -- at the same time -- preserve investment capital and investment growth.
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