Mortgage loan plus home loan
You can be a co-borrower on the property that your father owns. Some Banks require that you also be part owner of the property, some banks do not require this. You can take a home loan for a new property, normally Banks will ask you of all your current loans [auto/other home/personal/ etc] to determine the amount they will be ready to lend. Edit: The first loan I believe your father already has a property in his name ... your father can apply for Loan against property ... if he does not have sufficient income, then you can guarantee the loan [ie co-sign on the loan, some banks allow this ... however there is no tax benefit on this loan]  .   The second is the Home Loan for the balance amount that you would get it … Both the loans can be taken from the same Bank, there would be a overall cap as to the amount of loan a Bank would give depending on your income, further the finance for this house will only be to the extent of 80% of the value.
I recommend you ask this question to a qualified mortgage broker.  We just closed on our first house.  My wife & I have had several years of stable jobs, good credit scores, and a small side business with 1040 Schedule-C income... and we were surprised by the overwhelming amount of documentation we needed for the loan.  For example, we had 3 checks deposited to our bank account for $37.95.  We had to provide copies of the checks, deposit slip and a letter explaining the deposit.  One reason we might have had so much trouble:  the mortgage broker we selected sold our loan to a very picky lender.  On the plus side, we obtained a competitive rate with extremely low closing costs on a 30 year fixed mortgage.  However, I can't imagine the headaches we would've incurred if one of us were changing jobs to 1099 income. So if I understand your plan right, this will be your situation after the house is bought: Total Debt: 645,000 Here's what I would do: Wait until your house sells before buying a new one.  That way you can take the equity from that sale and apply it towards the down payment rather than taking a loan on your retirement account.   If something happens and your house doesn't sell for as mush as you think it will, you'll lose out on the gains from the amount you borrow, which will more than offset the interest you are paying yourself. AT WORST, pay off the 401(k) loan the instant your sale closes. Take as much of the remaining equity as you can and start paying down student loans.  There are several reasons why they are a higher priority than a mortgage - some are mathematical, some are not. Should I look to pay off student loans sooner (even if I refi at a lower rate of 3.5% or so), or the mortgage earlier ...   My thoughts are that the student loans follow me for life, but I can always sell and buy another home So you want this baggage for the rest of your life?  How liberating will it be when you get that off your back?  How much investing are you missing out on because of student loan payments?  What happens if you get lose your license?  What if you become disabled?  Student loans are not bankruptable, but you can always sell the asset behind a mortgage or car loan.  They are worse than credit card debt in that sense.  You have no tangible asset behind it and no option for forgiveness (unless you decide to practice in a high-need area, but I don't get the sense that that's your path). The difference in interest is generally only a few payment' worth over 15 years. Is the interest amortized the same as a 15 year if I pay a 30 year mortgage in 15 years?  Yes, however the temptation to just pay it off over 30 years is still there.  How often will you decide that a bigger car payment, or a vacation, or something else is more important?  With a 15-year note you lock in a plan and stick to it. Some other options: Let's look at some of your options: In a savings account, your $40,000 might be earning maybe 0.5%, if you are lucky.  In a year, you'll have earned $200.  On the plus side, you'll have your $40,000 easily accessible to you to pay for moving, closing costs on your new house, etc. If you apply it to your mortgage, you are effectively saving the interest on the amount for the life of the loan.  Let's say that the interest rate on your mortgage is 4%.  If you were staying in the house long-term, this interest would be compounded, but since you are only going to be there for 1 year, this move will save you $1600 in interest this year, which means that when you sell the house and pay off this mortgage, you'll have $1600 extra in your pocket. You said that you don't like to dabble in stocks.  I wouldn't recommend investing in individual stocks anyway.  A stock mutual fund, however, is a great option for investing, but only as a long-term investment.  You should be able to beat your 4% mortgage, but only over the long term.  If you want to have the $40,000 available to you in a year, don't invest in a mutual fund now. I would lean toward option #2, applying the money to the mortgage.  However, there are some other considerations: Do you have any other debts, maybe a car loan, student loan, or a credit card balance?  If so, I would forget everything else and put everything toward one or more of these loans first. Do you have an emergency fund in place, or is this $40,000 all of the cash that you have available to you?  One rule of thumb is that you have 3 to 6 months of expenses set aside in a safe, easily accessible account ready to go if something comes up.   Are you saving for retirement?  If you don't already have retirement savings in place and are adding to it regularly, some of this cash would be a great start to a Roth IRA or something like that, invested in a stock mutual fund. If you are already debt free except for this mortgage, you might want to do some of each: Keep $10,000 in a savings account for an emergency fund (if you don't already have an emergency fund), put $5,000 in a Roth IRA (if you aren't already contributing a satisfactory amount to a retirement account), and apply the rest toward your mortgage. I think you're missing a couple of things. First - why do you think its a reverse mortgage? More likely than not its a regular mortgage - home equity loan. If so, if they expect the stock market to rise significantly more than the amount of interest they pay on the loan - then its a totally sensible course of action. Second - the purchase in cash only to take out a loan later can definitely be a sensible way to do things. For example, if the seller wants to close fast, or if there are competing offers where not having a contingency is the tipping point. Another reason might be purchasing in an entity name (for example holding the title as an LLC), and in this case it is easier to get a loan if you already have the house, since the banks see the owner's actual commitment and not just promises. First, many banks do not keep the loan. Even if they send you a payment notice and process the monthly payment, there's still a good chance the loan itself was packed up and sold to investors. Collateralizing mortgages, in and of itself, is not inherently dangerous. But the loan definitely needs a house behind it. If you found a bank that keeps its loans, it would be a tough sell. You'd be asking them to trust that you've chosen the right number to match up with the house you intend to buy. And then they'd need to have another round of processing to turn this into a loan with normal collateral (i.e. put a lien on the house and tie them together.) "A few points: The reason your lender is asking you to be above 580 is because that is the magic number for an FHA loan where your down payment would be only 3.5% (the US Government effectively subsidizes the rest of your down pmt). If you had a score lower than that (but still above 500), you will need to put 10% down which is still less than the typical 20% down pmt that many of us make. It's not that you can't get a loan with a score < 580. It's that you don't qualify for the ""maximum financing"" thru FHA. You should do some research and decide if you even want an FHA loan. And keep in mind, you will throw away some money every month towards PMI (mortgage insurance) if you do FHA. Many insist on 20% down pmt to avoid that. How exactly these two items will effect your score is another question. It's possible that having accounts added back as revolving accounts could negatively / not positively effect it. It will likely effect it in some way and I'm not 100% which way or if it would be very significant. You may want to dispute both of those items regardless if you can't afford anything but an FHA loan. If that's the case, then you may have nothing to lose. You might also want to shop around for mortgage lenders. And look for a ""portfolio lender."" These type of lenders general have more flexibility in who they can lend to and the type of loans." "I'll assume you live in the US for the start of my answer - Do you maximize your retirement savings at work, at least getting your employer's match in full, if they do this. Do you have any other debt that's at a higher rate?  Is your emergency account funded to your satisfaction? If you lost your job and tenant on the same day, how long before you were in trouble?  The ""pay early"" question seems to hit an emotional nerve with most people. While I start with the above and then segue to ""would you be happy with a long term 5% return?"" there's one major point not to miss - money paid to either mortgage isn't liquid. The idea of owing out no money at all is great, but paying anything less than ""paid in full"" leaves you still owing that monthly payment. You can send $400K against your $500K mortgage, and still owe $3K per month until paid. And if you lose your job, you may not so easily refinance the remaining $100K to a lower payment so easily.  If your goal is to continue with real estate, you don't prepay, you save cash for the next deal. Don't know if that was your intent at some point.  Disclosure - my situation - Maxing out retirement accounts was my priority, then saving for college. Over the years, I had multiple refinances, each of which was a no-cost deal. The first refi saved with a lower rate. The second, was in early 2000s when back interest was so low I took a chunk of cash, paid principal down and went to a 20yr from the original 30. The kid starts college, and we target retirement in 6 years. I am paying the mortgage (now 2 years into a 10yr) to be done the month before the kid flies out. If I were younger, I'd be at the start of a new 30 yr at the recent 4.5% bottom. I think that a cost of near 3% after tax, and inflation soon to near/exceed 3% makes borrowing free, and I can invest conservatively in stocks that will have a dividend yield above this. Jane and I discussed the plan, and agree to retire mortgage free." It sounds like there are no provisions in the loan document for how to proceed in this case.   I would view this as creating a brand new loan. The amount owed is going to be (Principal remaining + interest from 2 years + penalties).  If you created a new loan for 13 years, that would not be how I would expect a lender to behave. I would expect most repayment plans to be something like make double payments until you are caught up or pay an extra $1000 per month until caught up and then resume normal payments.