Author Topic: Mortgage Ideas Needed - Rentals, Equity, Timing  (Read 1652 times)

jennipurrr

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Mortgage Ideas Needed - Rentals, Equity, Timing
« on: May 21, 2013, 01:46:16 PM »
Sorry this is lenghty, but I figured you all might have some ideas.  I completely appreciate any of them, even if they are...you are crazy, no way to do this...

About three years ago I refinanced my primary residence on a 10 year mortgage and rolled a small rental property in with it.  During that time my husband and I paid a set amount each month to the balance of the rental and have been throwing our extra money to the "home" mortgage (we've kept a spreadsheet detailing all this).  All that doesn't really matter, but the overall we have about $100,000 equity.

So we had this grand plan to pay off the mortgage and live cheaply, etc.  We had hoped the neighborhood would move to the better, but alas it has not.  The immediate homes are well maintained, we like our neighbors, but a co-worker about a quarter of a mile away had two different people get arrested in her front yard in the past week :/  Some really bad areas are nearby.  It is not walkable/bikeable due to this as these areas stand between us and work, grocery, restaurants.  Our neighborhood has minor issues on a regular basis - garages being broken into, etc.

We've decided to move on.  We found a great deal on a fixer-upper property (bank owned - the owner had a reverse mortgage) with the potential for a rental suite in the walkout basement and we've made an offer that is not contingent on the sale of our house, but is contingent on financing.  We're supposed to hear something back today.

The issue is both the timing and our situation.  The house needs some work, particularly the kitchen, one bathroom, and flooring that is immediate.  We would like to close on the new house while still living for a bit in the old house.  We also have three dogs, so idealy we would like to move out before selling the house to ease showing.

The new house price is $311,000.  We don't have a huge amount of cash at our disposal, about $20,000, and the owner (bank) will pay no closing costs.  So, we don't have enough for a 20% downpayment.  Also, we do not have any other debt but the two mortgages+taxes+insurance will put us over that 27% threshold for mortgage payments (maybe word to the rise refinancing at a short term). 

The credit union with the current loan has offered the option of refinancing the current loan to a HEL (not HELOC), pull out some cash for renovations, with full closing costs and a 15 year loan on the new house at 3.25% with no PMI.

Also, we have four rental properties, three which have mortgages.  I am not sure if this will have an effect...having 5 mortgages out at once, or if this is possible.  I remember hearing about the limit going down to 4, but haven't gotten more info on that.

We put a closing date on 7/31 and the realtor says the bank is flexible, so I think worst case we can get our house presentable, keep the dogs away from potential buyers, and try to sell it.  We will just have to live in a construction zone for a bit, which does not sound appealing.

I am wondering if there is a better option out there?  I was hoping for some kind HELOC with low closing costs we could pull from and do repairs, or a construction type loan.  I have a couple calls into other banks, but wanted to see if anyone had potential ideas?

jennipurrr

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Re: Mortgage Ideas Needed - Rentals, Equity, Timing
« Reply #1 on: May 24, 2013, 09:44:18 AM »
I didn't get any replies, but I did want to post in case anyone with a similar situation reads this later, as I think I have found a resolution.

A local bank looks like they will be able to finance the purchase as a construction loan and I can do the renovations before moving in.  The construction loan is an interest only loan, 5.5% rate and good for one year.  We plan to have everything done in a few months so that will give us plenty of time to sell the current house.  Then we can close on the new house with conventional 15 year financing.

arebelspy

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Re: Mortgage Ideas Needed - Rentals, Equity, Timing
« Reply #2 on: May 24, 2013, 11:27:03 AM »
Thanks for following up.

That sounds like a good solution.
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tryan

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Re: Mortgage Ideas Needed - Rentals, Equity, Timing
« Reply #3 on: May 24, 2013, 12:19:46 PM »
Every REO I've purchased (1/2 dozen) with financing came at a discounted rate because the lender was motivated to move the thing.

The most common "kick-back" was 1% lower on the rate.  Then as multiple deals went thru the same bank ... discounted closing costs.

The point being,  if your credit score is decent the bank should be eager to HELP you.  But you need to ask.   Especially if the house needs work.  The bank needs to recognize waiting for a cash deal is not in their favor.