Rookie Mistake
I have a tenant moving into my old home in a couple of weeks. I recently got a credit card using my new address which is now showing as my current address. I want to refinance the old property, but I've heard that if I say it's an investment property instead of a primary residence, then the interest rate on the refi is higher
Is this true? How can I get around it?
Better to tell the truth and pay a point or so higher for the rental property. Your LTV will be lower too. Federal offense to lie on credit application. At least you will be able to sleep at night
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
Thanks for the info
Simple. Just move back in for awhile.Be sure the utilities are in your name. You do not have to sleep there just maintain for at least six months. Then declare a matrimonial disruption. You wife ran off with a monkey. You ran off with a monkey whatever. Pick up your mail there every day. A bit disruptive but so is life.. Then in about six months, use any excuse. Your wife has a rash which is non responsive to medication, She has Aids. Leporsy Be creative. You can if driven by a Puritanistic instinct notify them that you have to move as your Mother in Law who lives with you has developed Asthma and has started to bark like a dog and is joining a Heavy Metal Band as the lead singer. Thus disrupting your lifes pattern etc. etc. etc.
I once worked for a bank and I have nothing but distrust for any institution that would hire the likes of me.
Cheers Enjoy Lucius
Funny story Lucius, but not very helpful.
lufos is very very helpful!! if you pay attention and READ BETWEEN THE LINES!!!!
remember the name of this web site starts with CREATIVE
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B.G. & Wheeler D. LLc Inc.
(A division of: Half Vast Enterprises)[ Edited by WheelerDealer on Date 12/23/2003 ]
Lufos RULES! He has such valuable input and has a way of telling it that imbeds it into the mind. I love to read his posts and finding the point in his writings...keeps the mind active!!
We are blessed to have Lufos in these forums. He's the king, in my mind!
I agree......Lufos is the best I have seen in a long time. The man is a genius.....listen to the advice he gives.
Sissy
Now that I've read Lu's post while I'm not half asleep, it makes sense to me. I got a better picture today, and going the investor refi route is not going to zap me that bad. Thanks for the info Lu.
Quote:I want to refinance the old property, but I've heard that if I say it's an investment property instead of a primary residence, then the interest rate on the refi is higher. Is this true? How can I get around it?ATLdog,
Not true for all lenders. You have to ask. Shop around.
For the non-owner occupied property, your cash-out LTV may be less than may be allowed for an owner-occupied property, but the interest rate may very well be the same for both loans.
If you look behind the numbers, you may see that the interest rate does not really matter anyway. What matters is that the rental property produce a positive cash flow that is high enough to support and maintain the property.
If the rental income covers all your operating expenses, all of your debt service, and leaves enough left over to make you happy that should be sufficient regardless of the interest rate on your loan.
I say this because the mortgage interest you are paying is expensed against your rental income on a dollar-for-dollar basis. The amount of cash flow you have left over is your taxable income before depreciation. A one-eighth point lower interest rate may give you a slightly higher cash flow, but your taxable income before depreciation will be higher. What you gain by the slightly lower interest rate will probably be partially consumed by the income tax you will pay on your higher taxable rental income.
Now I know that some of you purists will correctly disagree with me, and run spreadsheets to show that an extra $14 per month in cash flow only equates to an extra $3.50 in income taxes in the 25% tax bracket (Based on a $175K loan, 30-year fixed, 6% owner occupied vs 6.125% non-owner occupied loan rates).
My argument is that this spread ($126 per year) is too small to worry about when looking at the big picture. If an extra $126 in annual overhead will turn a negative cash flow property positive, then the margins are too thin here. Converting the property to a rental may not be the best business decision for this property in this case.[ Edited by DaveT on Date 12/25/2003 ]