Equity Position or Equity Injection

Thu - 7/29/2010

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Equity Position or Equity Injection

Equity Position

When refinancing or purchasing there will be a certain amount of equity in the property which belongs to one or more parties. If there is no down payment used but rather the seller "carries back" or "holds" a second mortgage of say 20% and the lender or bank funds the remaining 80% then the buyer has no equity position or a 0% equity position in that property. Lenders today prefer commercial and investment buyers to hold a 10%, 15% or even 20% equity position.

On acquisition this would be an Equity Injection of liquid assets into the property of 20%. On refinance this would simply mean leaving 20% of the value of the property as an "unencumbered equity".

Many lenders do allow the borrower to hold a small or even 0% equity position through "no down payment" or "no money down" financing to 100% of the appraised value. This is rare at the current time but was very popular especially for single family real estate investment loans with no down payment required from about 2004 to mid 2007.

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