I currently own and occupy a condo with ~75% LTV. My fiancé and I are planning to move to another city and buy a home in 5-7 years. We plan to put 20% down on that home, which will be a significant amount of cash for us.
Between now and then, we have a significant amount of free cash flow. I'm risk-averse enough that I'm not willing to take on any investments for this cash beyond a risk-free savings account. Therefore, I could get a better rate of return from paying down our current mortgage (no penalties). I'd like to do that, but I want to make sure we can still swing the down payment in five years.
Is it possible to use a second mortgage on my current home to make the down payment on my next one? I wouldn't go beyond 80% LTV on the current home. I have a vague recollection of signing a statement when closing my first home that asserts I didn't borrow the money for the down payment. Wouldn't that preclude me from using a second mortgage in this way? But then, why does the bank treat these two paths differently, even though they're the same for my net worth and ability to pay?