Refinancing Rental Property
I've read several times on this website that you can put the down payment on a property (non-commercial, 4 unit or less) using a home equity line of credit (or some other means) and then refinance to get the equity out. Or if you buy rental property undermarket value, you can refinance to get equity out at a later date I've been to several mortgage brokers and bankers and am told that refinancing on rentals isn't possible (too much risk). One broker did say that at best you could get maybe 55% of the equity out. I'm in Oregon. Anyone else run into this?
Thanks in advance for the help...
Paola
There are lenders out there that will let you cash out or get a heloc on a n/o/o prop (1-4units) but usually the ltv is limited to around 70-80% ltv and you need a little higher qualification, credit, etc. If you're looking just for a rate and term refi, you can go as high as 90-95% ltv.
Thanks for the reply! Have a great night.
P
Jm is correct,
Who ever told you that you can not refinance a NOO is a joker. They really have no idea what they are talking about and very probably only deal with you typical “A-conventional’ lender.
You can go as high as 80% on cash-out with a reasonable rate, any higher and it gets expensive.
You can also cross-collateralize another property you have an interest in. Basically you just allow the lender to put a lien on the other property instead of you having to pull cash out of the property or do a HELOC. This obviously saves time and money.
The truth of the matter is when you do a cash-out refinance on a non-owner occupied property, it takes away the yield spread from the broker. The yield spread is how the broker id compensated by the lender for finding them a borrower. If the lender no longer pays us, then we have to charge the client for our services and they still have to cover closing costs. For a 4 unit property your closing costs should be around $2,000 +/-. There really is no difference in closing costs except that the appraisal will be more expensive. Some brokers are simply too scared to tell the client, that if you want to do “this” or “that” then it will cost “you” (the borrower).
What you have to look for are lenders who will allow you to refinance with no seasoning / maturing of the loan. Lenders provide a professional courtesy of not allowing borrowers to refinance if it is within a certain period of time. There is certain time threshold for lenders just to make money back on the processing of a loan. There is allot more to this. Lenders also us this time threshold to let brokers know that they will have their yield spread premium recaptured if they bring a client to them who will refinance within a certain a period of time. Some lenders state this period is 2 months or 9 months. If you have additional questions, please feel free to ask. I can do this type of financial arrangement if you or anyone else might be interested.
Respectfully,
Phil
Phillip Herrejon
President of the Chicago Real Estate Investment Club
Investment Property Finance Consultant
312.375.7132
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