Will the Bank Consider Equity If My Appraisal Is Higher Than Purchase Price?

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Question – I have the opportunity to purchase a building next door to our current facility at a significant discount to what I believe it’s worth.  If the appraisal is higher than purchase price can I borrow additional money through that additional equity?

Our Response – In most cases the answer is no.  Having additional value in the building is great but most banks will only lend up to the sales price.  Banks will however, typically allow a refinance on property two years after purchase at which point they lend against the appraised value.

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