Legal Definitions - mortgaging out

Mortgaging out refers to a financial strategy where an individual or entity purchases real estate by securing a mortgage loan that covers the *entire* purchase price of the property. This means the buyer does not contribute any personal funds as a down payment; 100% of the property's cost is financed through the loan.

Here are some examples to illustrate this concept:

• First-Time Homebuyer with Specific Loan Programs:

  Maria and David, a young couple, are excited to buy their first home. They qualify for a government-backed mortgage program, such as a VA loan (available to eligible veterans and service members) or a USDA loan (for properties in designated rural areas). These programs allow them to finance the full purchase price of their new house, meaning they don't need to make any down payment from their personal savings.

  This is an example of "mortgaging out" because Maria and David are purchasing real property (their home) by obtaining a mortgage that covers 100% of its cost, requiring no upfront cash contribution from them.

• Real Estate Investor Acquiring a Rental Property:

  An experienced real estate investor, Mr. Henderson, identifies a promising duplex property he wishes to add to his portfolio. Instead of using his accumulated capital for a down payment, he secures a specialized investment loan. Due to his strong financial history and the property's projected rental income, the lender agrees to finance the entire purchase price of the duplex.

  Mr. Henderson is "mortgaging out" because he is acquiring real property (the duplex) by obtaining a loan that finances the entire purchase price, requiring no personal cash contribution for the down payment.

• Business Purchasing Commercial Property:

  "Apex Innovations," a growing tech company, decides to purchase its office building rather than continue leasing. Through a unique financing arrangement with a commercial lender, perhaps tied to specific government incentives for business expansion or certain industry programs, Apex Innovations is able to secure a mortgage that covers 100% of the building's purchase price.

  Apex Innovations is "mortgaging out" as it is buying real property (the office building) by financing the entire cost through a commercial mortgage, thereby avoiding the need for a cash down payment from the company's reserves.