Leveraging when buying real estate keeps your liquid assets where they belong while watching your properties appreciate over time. Financing for the long term means obtaining a loan underwritten to Fannie/Freddie standards. Programs under these banners offer the most competitive long term financingleveraging to the max available in today’s market.

Other financing sources may offer good rates but not for longer terms and typically have a balloon rider which means the note will come due in full after a certain period, say three to five years and the note will have to be paid off completely or refinanced.

Fannie/Freddie loans require a 25 percent down payment to obtain the best rates and sometimes that 25 percent isn’t readily available. Or if it is, the investor would rather not cash in some funds and use them as a down payment. Once the down payment is made the only way to get those funds returned is to sell the property. Even then there are closing costs that will be deducted from the proceeds and defeats the purpose for long term leveraging. But you can borrow the down payment. Not from another lender but from yourself.

This is most often accomplished with an equity loan on another property, typically a primary residence. Borrowing a down payment is perfectly legitimate as long as the loan is secured by an appraisable asset and your primary residence will provide you with the lowest rate and most competitive equity loan terms. You can’t borrow your down payment as a cash advance on a credit card as the funds aren’t secured against anything.

When using an equity loan to help finance a down payment and closing the lender for the rental property will make sure you can afford the monthly payments from the equity loan and will usually require a decent amount of cash or otherwise available funds in the bank. These loans are for the highly qualified borrower and not every lender will accept the total amount needed for a down payment and closing costs coming from an equity loan. But if you want to leverage to the maximum, that’s how you do it.