Offer your thoughts or opinion on the input financial query or topic using your financial background.

Purchasing a home using collateral
What do you see as the advantage of doing this? When you buy a house with a mortgage, the bank gets a lien on the house you are buying, i.e. the house you are buying is the collateral. Why would you need additional or different collateral? As to using the house for your down payment, that would require giving the house to the seller, or selling the house and giving the money to the seller. If the house was 100% yours and you don't have any use for it once you buy the second house, that would be a sensible plan. Indeed that's what most people do when they buy a new house: sell the old one and use the money as down payment on the new one. But in this case, what would happen to the co-owner? Are they going to move to the new house with you? The only viable scenario I see here is that you could get a home equity loan on the first house, and then use that money as the down payment on the second house, and thus perhaps avoid having to pay for mortgage insurance. As DanielAnderson says, the bank would probably require the signature of the co-owner in such a case. If you defaulted on the loan, the bank could then seize the house, sell it, and give the co-owner some share of the money. I sincerely doubt the bank would be interested in an arrangement where if you default, they get half interest in the house but are not allowed to sell it without the co-owner's consent. What would a bank do with half a house? Maybe, possibly they could rent it out, but most banks are not in the rental business. So if you defaulted, the co-owner would get kicked out of the house. I don't know who this co-owner is. Sounds like you'd be putting them in a very awkward position.