We recently moved to Chicago and are renting out our WA home. We are wondering if we can refinance our WA property in the name of our LLC? This way, we can keep our business/personal credit separate. We value our current credit scores and do not want any adverse impact of “additional debt” on our credit scores. Any suggestions will be very much appreciated. Thanks!
Hollyberries
The bottom-line is whether you will find a lender willing to lend to your LLC separate from yourself. It’s not that you cannot refinance in the name of your LLC, it’s just hard since most banks will make you jump through many hoops.
First of all, your LLC needs to have a “credit history” of its own. Chances are, if your company have not been in existance for some time, it probably has not built up enough credit to qualify for a loan.
If your company does not have the credit history to get a loan, then you have to personally guarantee the loan. Each bank has it’s own lending criteria, which may or may not then impact your personal credit history/score.
In other words, you need to shop around…A LOT. And this matter is quite a bit more complicated than you might imagine, so you may not want to rely on just advise you get from this forum. You’ll need to first get the property into your LLC before you can even consider refinancing in it’s name.
There are only a handful of A paper banks that will lend to LLCs and you can expect a max. LTV between 75-80 and some of them will still require a personal guarantee. Explore these options first.
If all else fails, you can go with a SML or HML. The LTV will be lower/interest rates will be higher, but the deal will get done.
Regards,
What does SML or HML mean?
I made a call to a couple of lenders regarding my desire to refinance in the name of LLC for our WA property. One lender said having two mortgages will in fact increase our credit scores. I was under the assumption that the more mortgages you have, it will create a negative impact on your credit scores.
scratching my head
Hollyberries
How does a start up company build credit if banks require a credit history before lending?
It’s the same way an individual build credit.
For instance, even a starting business would be able to get credit cards. When these are paid on time, the business starts to build a good credit history. Same thing with utilities accounts for your properties that are opened in the name of your business. If paid on time, a good credit history is recorded.
If your business has a bank account, most banks will offer your business a “line of credit” after a year or two. You may even be able to speak to the branch manager and see if you can get one earlier.
I’m sorrry the industry acronyms; SML stands for soft money lender and HML stands for hard money lender.
The amount of mortgages you have on your credit report is not what effects your FICOs, it is your debt to income ratios.
It is safe to say that your scores will be different with one mortgage then with two.
Regards,
You can’t begin to think about doing any type of refinancing until you have transferred that property into the LLC. That’s your first hurdle.
Make sure that it will not trigger the Due on Sale Clause. Check with your mortgage company.
Due on Sale in lamens terms means performing a certain action involving the property which will make the entire balance DUE AND PAYABLE IMMEDIATELY.
Toska Palmer
Chicago, Illinois
Many thanks! I will most definitely check into it.
Hollyberries
HI
i know of some one whom may be able to help you out?
message me and i will make the refferal if you would like ?