Author Topic: Getting mortgage on already paid off rental?  (Read 1428 times)

AriesFire

  • 5 O'Clock Shadow
  • *
  • Posts: 17
Getting mortgage on already paid off rental?
« on: May 24, 2017, 04:47:43 PM »
Hi everyone- just looking for some advice on mortgages for rental houses.

My husband and I are under contract for our latest property, purchase price $117k, will be getting a mortgage for about $85k. We also own another property worth about $75k outright.

Is there any reason why we shouldn't pull a mortgage on that property at the same time? We'd like more cash to jump on other deals when they come up, plus can payoff a line of credit on another property that's at 6.5%.

Is there any value or drawback to us splitting the mortgages- like one in my name and one in his name only?

Is this enough info?
Thanks!

live-fi-or-die

  • 5 O'Clock Shadow
  • *
  • Posts: 5
  • Age: 33
  • Location: Portsmouth, NH
Re: Getting mortgage on already paid off rental?
« Reply #1 on: May 26, 2017, 05:39:56 PM »
Repayment terms are a bit different, but have you considered securing a HELOC on your current property? It is less committal then a mortgage, and you don't have to pay anything until you draw on it.

I have a 3 unit owner occupied property that I have put a good deal of sweat equity in. Additionally, since I bought in 2011, I was fortunate to be able to ride the market back up. I saw a promotion at a local bank for HELOC @ prime minus .25% so I jumped on it. Free appraisal, No Closing Costs, and now I have a $120k line of credit at my disposal with nobody to answer to.

Planning on purchasing a single family home sometime in the next year or so and intend on using my HELOC to build an accessory dwelling unit on the property for additional income. If I had to go through a bank for a construction loan, it would be a major PITA and the terms would not be as favorable.

Just a thought, but having options is never a bad thing :)

marty998

  • Walrus Stache
  • *******
  • Posts: 6570
  • Location: Sydney, Oz
Re: Getting mortgage on already paid off rental?
« Reply #2 on: May 26, 2017, 06:09:18 PM »
If I had the choice - I'd be leveraging my investments further by borrowing against the increase in equity.

Much more preferable than borrowing again my own residence for piece of mind reasons - however in order to get going I did have to borrow further agains my own place.

Down the track I'll try and flip that around, costs permitting.

Timmm

  • 5 O'Clock Shadow
  • *
  • Posts: 41
Re: Getting mortgage on already paid off rental?
« Reply #3 on: May 26, 2017, 06:38:19 PM »
We keep our rentals mortgaged and (effectively) invest that money. I haven't found a deal on HELOC for rentals, only primary mortgages. We only have a couple, so those are not too hard to find or much more expensive than owner occupied.

We've not separated the loans, but I suppose there are advantages if you can separately qualify and don't have any concerns about separate title. I'm thinking there must be scenarios where it can help qualifying on DTI limits for future loans, though you're separating the Income used for that as well as Debt. So simple cases may be a net wash.

I am relatively new to these boards, I may be an outlier in embracing smart debt.

AriesFire

  • 5 O'Clock Shadow
  • *
  • Posts: 17
Re: Getting mortgage on already paid off rental?
« Reply #4 on: May 27, 2017, 09:46:48 AM »
Hi, thanks for the replies!

So we actually already have a HELOC on our primary residence that was used to purchase a second rental property, a triplex.

We were not able to get another  line on the triplex, a bank gave us a loan using this property, but it's at 6.5% and is not a line- if we pay it back we can't redraw on it. I haven't seen any available lines for rental properties, although maybe we could look around more. My thought was even having access to this cash, were paying way too much in interest and should just pull a mortgage on the third house(was paid for in cash) at a lower rate and pay this higher interest loan back and get out of it.

However, we might be able to get a mortgage AND keep the other loan, we'd be very highly leveraged, but if we find some other deals right away it might work out. I will look around this forum and try and do some calculations using our numbers. I'm new here and don't have much experience calculating our return rate on investment properties!

Megma

  • Pencil Stache
  • ****
  • Posts: 716
Re: Getting mortgage on already paid off rental?
« Reply #5 on: June 02, 2017, 10:09:58 PM »
I thought i saw somewhere (maybe here,  maybe bigger pockets...) that wells Fargo wad offering rental HELOCs right now. To battle their recent bad PR.