01-05-2009 10:27 PM
I have a very specific and possibly complicated question:
I purchased a duplex three years ago for just over 200k (80/10/10 at the time), and lived in the bottom half for quite some time. I make extra principle payments and have paid it down to 140k on my primary loan (still 15k on second mortgage (HELOC), as I used equity to buy a shore property that provides cash flow). Anyway, my interest rate on the duplex is the worst of any of my rentals, at 7% for the first ten years. In seven more years, the interest rate will begin adjust yearly, since it's a 10 year ARM. I intend to have it paid down to a significant extent by the time the rate adjusts, but I was wondering what kind of refi options exist for me? My rents and expenses on this unit cause me to break even on it. I assume I no longer have 20% LTV on a refi, with the housing market downturn, although I've peformed over $25k in repairs/upgrades/enhancements since purchasing, which hopefully compensate for *some* of the housing market crash. I'm not sure if I'd be better off trying to refi my primary home ($300k purchase one year ago, 6.5% fixed 30 year mortgage, 235k mortgage), or this rental unit. Honestly, I'd love to refi both if the rates can be dropped enough to work to my advantage. I plan to keep all my properties indefinitely, as they are part of my retirement income gameplan.
I'm self-employeed, so all of my properties were purchased with stated loans, which I understand have fallen by the wayside (my FICOs were 760-800 at time of each purchase). I'm not sure how I would fare applying under full doc conditions that the current market seems to demand. At this point, I can afford all of my payments plus extra to pay them down in under 15 years, but with current market trends favoring lower interest rates, I'm interested in lowering my rates to facilitate paying off my homes even earlier than I anticipated.
Basically, I want to know the difference between refi's on rentals vs. primary homes. I'm guessing refi'ing a rental is not easy, and not likely to yield significant benefit, especially since the original lender considered my duplex owner occupied at the time of the loan, so I'm guessing it's an uphill battle now that I no longer live in the duplex and it is a true, 100% rental that I'd be refi'ing
Regardless, I am continuing to march toward paying off my mortgages in under 15 years, but any opportunity I have to pay even less interest along the way, I'm interested in taking advantage of.
Thanks in advance for your insights.
01-13-2009 12:26 PM
Stated income loans are pretty much gone, I'd see what you can put together on your 2008 tax returns in order to start qualifying for mortgages again if that is what you want.
Assuming your tax returns do qualify though, if you have more than 4 financed properties you are going to have difficulty refinancing anything but your primary residence - as Fannie Mae & Freddie Mac limit the amount of financed properties one can have when they are doing a mortgage transaction on a 2nd home or investment/rental property. Your primary residence is still fine up to 10 financed properties though.
Assuming you don't have more than 4 financed properties, and your income would qualify, then in order to refinance any investment property you are going to need to have 20% equity - the reason being is that no MI providers are insuring investment properties anymore.
So it's going to come down to income, equity & amount of properties you have financed which will determine if you can refinance your primary residence only, or if the rental(s) can be refinanced as well. However in the scope of things 7% isn't a bad rate for a rental property.
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