Financing in Overland Park>Question Details

Ranger75, Both Buyer and Seller in Overland Park, KS

My owner financed rental property term is up. Do I need to have 20% down to refinance as an investment property through a traditional bank?

Asked by Ranger75, Overland Park, KS Thu Dec 16, 2010

The property is near downtown Overland Park and I've never had a problem renting it for a positive cashflow. I've owned it for 5 years and paid down $13k on the mortgage. If I refinance for what I have left on the mortage ($110k) do I still need to come up with a 10-20% down payment on this amount?

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Sean Endecott’s answer
You can't make a decision about your financing options until you have discussed them with lenders who make these loan types. For this reason I think we should talk. 913-440-9785. As far as putting on the market goes it is tough to say what price the property would sell for or how long it would take. I could at least provide you some information on what I think your chances are. Right now you are heading into a time of year that typically picks up so you have more options now than you have in the last several months. First thing is first we talk to a few lenders and check the comps in the area. Another option may be to renegotiate your current finance situation. To have a tenant paying rent is a good thing. It doesn't cost you anything to talk about this in detail with me. I hesitate to provide lender references or detailed recommendations over the internet to a stranger so please call if you'd like more assistance from me directly.
0 votes Thank Flag Link Thu Dec 16, 2010
My guess is I don't have 20% equity and the thought of coming up with $10-$20k isn't appealing on a property that cashflows $300 per month. I'd rather sell but the market seems horrible and I would hate to kick out good tennants to put the house on the market only to have it not sell and then go through the process of refinancing and then looking for tennants again.
0 votes Thank Flag Link Thu Dec 16, 2010
For residential rental property there is a variety of thresholds for different lenders in our area. I work with investors that have established relationships with lenders that will loan on these property types. One lender may tell you 20% while another may turn you down completely. With 20% equity more lenders are comfortable therefore that has become the unofficial standard that everyone is familiar with, but for a few lenders its about the numbers and how confident they are in your ability to pay the loan back more than the down payment or equity amount. Usually you want to have an established relationship with 1 of these lenders ahead of time. Right now the residential lending market is typically seek 20% down because they consider the purchase price the value and appraisers have been under pressure to appraise near the purchase price which eats into your equity position. You need to know what similar "rented" properties are valued at to have a true idea of what the value is if you want to avoid coming out of pocket an additional 20%. It's in your best interest to consult with a professional that is dealing with these scenarios on a regular basis. I may be able to provide some assistance with this including providing comparable sales and a few recommendations of lenders you can try.
0 votes Thank Flag Link Thu Dec 16, 2010
Ususally no, they will look at what you owe and what it is worth and will want you to have 20% in equity, then you will not need an additional down payment as long as you meet credit guidelines. you will want to provide a proof you have been paying your existing mortgage ontime.

You should meet woth a local and trusted mortgage company, they can guide you through the process.

Please see my blog with tips and advice on getting a mortgage in todays market
0 votes Thank Flag Link Thu Dec 16, 2010
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