Refi question

[Johnshan1]

Need some advice, I have 2 loans on my home (80/20) and I am in the middle of trying to do a refi, I can refi the first 80% loan for 6.9% fixed which I am very happy with through a local bank. <br /><br />My 20% loan does not show up on my credit report, if I fail to mention I have another loan on the home it will be assumed i have 55K in "equity".<br /><br />Can I go ahead and do a home equity loan for 20K with them? They assume I have 55K in equity since they dont know of the second loan of the home. If I take 20K out I will owe 185K on a 185K home.<br /><br />I asked to do a refi of 165K with a HEL of 20K but they would only loan 90% of a homes value in my case thats what I owe so it doesnt allow me to take any money out to pay high APR credit cards off and some other debt. <br /><br />Any thoughts? I really need to either get a low payment for the 165K and then pay these other debts off on my own or get a 185K loan with 20K cash out but no one seems to do that, any ideas would be great.

 

[KRS]

Re: Refi question

That would be dishonest.<br /><br />The bureau doesn't reflect your 2nd mortgage, although the title report will.<br /><br />There is little chance that your current 2nd mortgage (the 20%) would let you refinance the 1st, it would require they complete a subordination agreement, which most lenders don't like to do. Without this subordination agreement, when the 1st mortgage is paid off during the refinance, the existing 2nd mortgage "falls" into 1st place, and the new 1st mortgage gets recorded behind the 2nd which fell into 1st... and it becomes a defacto 2nd, which the lender won't be agreeable to.<br /><br />So, either refi them both, or talk to the 2nd mortgage company about a subordination agreement.... such as their requirements to grant one.<br /><br />I just refinanced with Lending Tree, it went well, maybe give them a shot. They do 100%+ LTV loans.<br /><br />Good luck.

 

[BOBPELL]

Re: Refi question

Originally posted by Johnshan1:<br /><br />My 20% loan does not show up on my credit report, if I fail to mention I have another loan on the home it will be assumed i have 55K in "equity".<br />

Is the smaller loan from a lending institution or a private individual, like a family member? <br /><br />Is the loan recorded as a lien on your property?

 

[Johnshan1]

Re: Refi question

These are 2 seperate loans from big name mortgage companys. I figured the title search would show the other mortgage, and I dont feel it is dishonest since I would be paying it off anyways. As far as a lien, i would have to do more research however im fairly sure the 20% is tied into the house. If I could find someone to do 100% financing that would be ideal, but then I am forced with PMI insurance correct? More and more I am leaning towards just doing a standard refi for the amount I owe to get a better APR and calling it good, I know in the long run thats the best way to go as my goal is to turn this into a rental and expand my portfolio with other ventures, no need to expand debt on the mortgage if its not directly going to the property I suppose, thats the smarter thing to do it seems to me.

 

[KRS]

Re: Refi question

You are correct about the 80%+ requiring PMI insurance.<br /><br />Investors who make money on rentals typically don't have them financed to the max. It's hard to rent a home with a mortgage, pay the tax, pay the insurance, pay the maintenance, etc and still make anything unless it's in a higher rent area.<br /><br />The renter can help buy your equity into the home so long as it stays rented. If your goal is to make income from renting, it may be difficult. If your goal is to break-even and hold the property long-term and gain slow equity, then it may work.<br /><br />An important question to ask yourself is: if you were unable to rent it for 3 months, could you afford to make the mortgage payment and still pay your other bills?

 

[Johnshan1]

Re: Refi question

Thanks for the thoughts, this would be a rental in about 10 years, it will serve as my primary residence until we make that move. This home is right next to a lake within 10 minutes of Maines largest city so it does have the potential to fetch a decent profit if I play the game accordingly. Having said that, Capital One has offered me a deal, and I have been able to cut one of my mortgages down to 15 years in doing so, if the property comes back with the correct value i think it will work well.

 

[KRS]

Re: Refi question

Congrats, hope it works out, the faster you build equity the better.