Image provided by: University of Oregon Libraries; Eugene, OR
About East Oregonian : E.O. (Pendleton, OR) 1888-current | View Entire Issue (Feb. 3, 2017)
14E // Real Estate & Home Builders Guide // February 2017 Refinancing rental property? Check out these tips for shopping around By Ilyce Glink and Samuel J. Tamkin Tribune Content Agency Q : I need some information regarding which way I should go about refinancing my rental property, in order to reduce my rate, as well as to be able to take out some cash. There is a line of credit, with a high interest rate, with a large bank. Is HARP, a better place to go? Is a credit union better? Is a local small bank better? There is no mortgage on the house, and the house has appreci- ated because of where it is located, a hot vacation rental market. Can I check several of these banks, credit unions and HARP within a month and not be hit on my credit score? : It seems that you should have a few options for taking cash out of your rental property, particularly if you don’t have a mortgage or the mortgage balance is low and you haven’t drawn down your equity line of credit. Let’s start at the top and parse through the various opportunities for using your equity to get a loan. First, lenders treat vaca- tion and rental proper- ties differently from an owner-occupied primary residence. That’s because there is a perception that rental properties tend not to be maintained as well or be as stable as primary resi- dences. An owner will tend to keep the property they live in every day in better shape than one that is main- tained to a rental standard. Of course, that may not be how you maintain your rental property, especially if it is in a hot neighborhood as you indicate in your email. Mortgages that fall under the Home Affordable Refi- nance Program (HARP) are designed for properties A that are either underwater or have less than 20 percent in equity and would be diffi- cult to refinance. Since you do not have a mortgage, and we’re assuming you haven’t drawn down any equity on the credit line, you wouldn’t qualify for HARP.. Could you take out a new line of credit? Possibly. Some lenders will do home equity lines of credit (HELOCs) for investment or vacation properties. You might want to shop online but also talk to a local, repu- table mortgage broker. Some lenders will also do a cash-out refinance for an investment property, but don’t expect to take out 80 percent of the equity. You might be able to borrow 50 percent of the equity you have in the property, or perhaps a little more. As for shopping around, you can certainly do this without officially applying for a loan. If you know what your credit score is, just tell the lender, “Assume I have a 760 credit score” or what- ever it is. If you don’t know what your credit score is, you can go to AnnualCredit- Report.com, and pay $9 for a copy of your credit score from one of the three credit reporting agencies: Equifax, Experian or TransUnion. While the credit score a lender uses will differ a bit from the three you’re offered, it’s close enough to get you pretty far along in a conversation with a lender. When you shop around you’ll want to talk with a mortgage broker, a big national lender, a local or regional lender, a credit union and perhaps a company that only does online lending to get a good idea of what kind of loans are available. We’ve found that by shopping around with different types of lenders, you’ll wind up getting a understanding of the market for a loan like yours, and which lenders are interested in doing that sort of business. Not all lenders will want to finance or do a cash-out refinance for an investment property. At this point of your loan search, you’re looking for good information to guide you on how to proceed. Interest rates are only one part of the story. You also have to see what the closing costs will be of any loan product you contemplate. While you might want to lower your monthly payment or interest rate on your loan, you have to see how long you it will take to repay the loan to really assess whether the loan has the right interest rate, right costs, right term and fits your financial future. Don’t look for what seems to be the cheapest. You also want to learn about the prod- ucts and make the right deci- sion for your budget. What- ever lender you wind up with, you’ll need to provide proof that you can afford to pay the mortgage, and may be asked to show proof of all assets. And even if you could afford the actual payments, a lender might tell you that you don’t qualify for a loan of the size you need. For example, if you are living on Social Security and the rent from your rental property, and you want to borrow $200,000, lenders may tell you that you can’t afford to make the loan payments each month, on top of the real estate taxes and insurance that they will require you take out (if you don’t already have it). Take your time. Work with quality lenders who take the time to explain things to you in a way that’s understandable. And, if you find that you’re being talked down to, be sure to vote with your feet. FOR SUBSCRIPTIONS MAIL TO: Eastern Oregon R eal E state & H om ebu ilders G u ide 3 ZONES TO SERVE YOU! W M E E = EAST: Umatilla, Morrow, Gilliam & Wheeler Counties M = MOUNTAIN: Union, Wallowa, Baker, Grant, Malheur & Harney Counties W= WEST: Umatilla, Morrow, Gilliam & Wheeler Counties 211 SE Byers • Pendleton, Oregon 97801 541-278-2670 • 1-800-987-7511 I’d like to order a subscription(s) for the following newspaper(s). E M W (Circle one) I am enclosing $16 for my subscription for 12 issues. Name Address City, State, Zip Phone # MC/VISA exp. date For Further information Change this... on Eastern Oregon contact these Chambers of Commerce Baker City 490 Campbell 541-523-5855 into Boardman 101 Olson Rd. 541-481-3014 THIS! SOLD Enterprise 107 S.W. First 541-426-4622 Hermiston Heppner John Day La Grande Milton-Freewater Pendleton Umatilla 415 S. Hwy 395 289 N. Main 281 West Main 102 Elm 505 Ward 501 S. Main 1530 Sixth 541-567-6151 Look for your 541-676-5536 next home in 541-575-0547 ONE place, The 541-963-8588 Eastern Oregon 541-938-5563 Real Estate & 541-276-7411 Home Builders Guide! 541-922-4825
