I bought a house as a rental. I think it is worth more than I paid and needs work. I am replacing the furnce, windows, floors, remodeling the bathroom etc... I want to refinance it as soon as I'm done the work so I can take that money and buy another rental. Is the bank going to give me a hard time about this, do I have to tell them what I want the money for, do I need to already have the house I want to buy picked out? Also for the mortgage on the current house I went through CMHC with 5% down, will this make it more difficult? Please explain the steps to me, I don't really 100% what I'm doing.
2007-01-29 06:10:08 · 5 answers · asked by Vanessa 2 in Business & Finance ➔ Renting & Real Estate
I am locked in for 1 year fixed rate of 5%, I will be penailzed if I change banks. Anyone know how much that ranges?
2007-01-29 07:39:53 · update #1
Refinancing the home on a new appraised value is not that tough and you do not need to tell them what the cash out is for. All you really need is a new appraisal. However, getting 95% financing on investment properties is really tough. I am guessing the first house was done as a primary residence in order to get that financing. If the next house you look for is bigger/ more expensive- you might be able to pull it off as a primary home again- but this will get even more difficult after you have done it twice as the mortgages will be showing up on your credit. You do want to ensure you don't have a pre pay penalty on any of the loans if your plan is to fix them up and refi for the cash out.
2007-01-29 06:51:19 · answer #1 · answered by flamingojohn 4 · 0⤊ 0⤋
You are on the right track. Finish your renovations.
THEN:
1. Get a new appraisal of the house.
2. Shop for a refinance mortgage. you most likely won't get a lot of help from the current mortgage holder though.
3. Take the CASH OUT ( the excess funds created by the refinance) and go forward from there.
just a bit of caution here. don't do this repeatedly and dig yourself a hole. Rentals historicaly will take substantail amounts for upkeep so make sure your are covered at all times and not over extended to a point you can't do what is needed at any one time. That could get bad. Get good insurance against everything and be picky about your tenants.
2007-01-29 14:26:43 · answer #2 · answered by hdsok 2 · 0⤊ 0⤋
If your credit is in pretty good standing you should be okay. Also, you have to have a low debt to income ratio. They will also use about 75% of the current rental income to help you qualify. You do not have to tell them why, just say for home improvements or it is for another investment. You do not have to explain exactly what for. I would also try two or three places to try and get the best loan that you qualify for. Watch that you do not have a pre-pay penalty on the current mortgage that you have. Good luck, if you have any other question or need help with the refinance and the purchase I could help point you in the right direction.
2007-01-29 14:30:37 · answer #3 · answered by Anthony P 2 · 0⤊ 0⤋
If you THINK your rental is worth more than what you had paid, make sure that it's worth more. Get an independent appraiser so you know you can get the money out of it. Also, if you fix things up, do you know how much rent you can get? Because, if your mortgage, property tax, HOA and insurance total cost is more, you must pay the difference each month. And if the property is vacant for a few months, make sure that you can cover the cost. I know so many people who thought they can make money doing what you are trying to do, ended up losing money and property because they only listened to someone who can make money out of you (like realtors, loan people and seminers) didn't do the homework of what if's.
Real property can be a real headache, make sure you know what you are doing. Make sure you have a backup plans.
2007-01-29 14:45:37 · answer #4 · answered by Pluto 3 · 0⤊ 0⤋
it all depends on your credit. when ur credit is good u can get a lot of rentals and make money like that and you dont need to work..
2007-01-29 14:21:14 · answer #5 · answered by Anonymous · 0⤊ 0⤋