Question: I have a duplex that is seller financed. (I am the borrower) It is financed for $70,000.00. I would like to refinance it for $96,800.00. When I go to the banks, how will they look at this? Does the issue of owner occupancy still come up with a refinance? Is there a requirement on how long the seller must hold the note for before the buyer can refinance? When you refi, are there downpayment requirements like there are on a new purchase?
Thanks everyone! This site has been very helful thus far.
JayDee
Title Seasoning will be an issue since you are trying to cash out. How long have you owned the property?
Yes. Owner occupancy is still an issue.
Same ol’ song and dance… What’s you credit? Income? Time you’ve owned the property, etc.
-Patrick
Ok. Thanks. Here’s the situation in a nutshell. And if anyone can jump in and tell me what to do, I would so much appreciate it.
I am trying to buy an investment property off of my brother. He is only selling it for 80% of the value, and initially that was because we thought I would be able to get a mortgage using the 20% equity in the property as collateral for downpayment. In fact, the bank that currently holds the mortgage on the property was going to do this for us until they found out the property was for investment purposes.
So, I start calling brokers and banks in my area to find out who would do the “equity gifting” as they have been calling it. Turns out not only will I get a higher interest rate because it’s an investment, but no body wants to do equity gifting on investment properties.
I did find a bank who would do equity gifting on an investment property, but unfortunately that wouldn’t work because it was a 20 year term and the payments would be too high.
I have brokers telling me to say that it’s owner occupied or to come to the table with a check for the downpayment and then just rip it up after closing, or take out an 80/20, and then turn around and pay off the 20% loan right off the bat.
I had one bank tell me that they would do equity gifting on an investment property, but it will be a 5/1 ARM and the interest rate was still high.
Since I don’t know a lick about mortgages, I am so confused as to what to do in this situation.
I want the following loan:
30 Year or more in term
Payments (PITI) to be no more than $830.00
Downpayment using the 20% equity in the property
My brother wants to basically give this property to me for 80% of it’s value. I am getting so discouraged here. ANd I don’t know what to do. Can somebody who really knows how to gently explain things give me some suggestions?
I thought maybe it would be easier to refi, that’s why I gave the hypothetical question initially about the seller financing. We are seriously willing to do whatever it takes in order to get the payments so they work ($830.00) and have me be able to come to the closing with no money down.
Thanks!
You guys are the best!
Jay Dee
Patrick sums it up pretty nicely.
Does the issue of owner occupancy still come up with a refinance?
YES…always
Is there a requirement on how long the seller must hold the note for before the buyer can refinance?
This will depend on what Lender is used. Some are more restrictive than others.
When you refi, are there downpayment requirements like there are on a new purchase?
That will depend entirely on the parameters of the loan. What is the LTV (Loan To Value) that you are looking for?
If you are wanting a R/T (Rate and Term) loan then you will not have to bring any money to close. The loan amount needs to be high enough to cover all the fees.
If you are wanting to take Cash Out, then the fees would be deducted from the cash out.
Ok I see. Well, by rate and term loan, you mean just refi ing for a new rate and term, not to cash out?
Here’s all the stats:
If my brother (the seller) is doing seller financing for me, the amount financed with him is $70,000.00
At the refinance, I would want to refi it for $96,800.00 (Which would still leave 20% equity in the property) as it was apprasied for $121,000 last year.
So, are you saying that the fees (or closing costs) of the refinance would have to be rolled into the loan (96,800)?
I am basically looking for a way to come to closing with no money down, and hand my brother over $96,800.00 (which would be 80% LTV)
Any ideaers?
Thanks again.
JayDee
MAN! This is really complicated!
Ok I see. Well, by rate and term loan, you mean just refi ing for a new rate and term, not to cash out?
YES.
If you are trying to avoid cash out of pocket at close then;
The only way that you could do this is either have your brother pay some concessions towards closing costs or
raise the loan amount to cover the closing costs.
It is really not that complicated. You just need to know what the parameters are that you are working with and go from there. 
Yes but Mark, I can’t get anyone to allow me to do the “equity gifting” on an investment property. So outside of doing an 80/20, do you have any suggestions on how this can be done?