I'm hoping to get some help from the BP community thinking outside the box on this one.
I bought a condo 12 years ago, and have been renting it the last 10 years. It has a first trust with Wells Fargo, and an Equity line with PNC. Until recently, the rent has more than covered both notes, and the condo fee. Market value is still under water from when the market crashed, but it hasn't mattered because it has been cash flowing well for years.
Now, the equity line with PNC is "resetting" because it has been 10 years. The new payment on the line is more than doubling as a result of the loan change. That higher payment would result in a $1,000 LOSS each month on the condo.
I can afford to cover the loss, but I just can't wrap my head around throwing away all that money.
Neither lien holder will allow me to refi or consolidate the loans because it is not my primary residence. And I can't sell it without writing a huge check because it is under water. And I can't raise the rent to cover the payment increase.
I was wondering if there would be another angle other than a short sale.
I haven't done a lot of refi's but I dont think the lender can prevent you from refi'ing with another bank. THEY might not do it but I don't see why another bank wouldn't other than it being underwater might prevent it from happening.
Can you pay of the LOC? LOC's are probably better for short term deals.
I was going to suggest the same as @Michael J. .
Have you investigated other lenders?
Try to look at the bright side? At least you are paying principle on the line now?!
This is something you knew could happen ten years ago. That's what typically happens on interest only loans. There is always a point in time where you have to pay the piper. You knew this then so this shouldn't be a big surprise.
That said, no one is required to refinance you if you do not meet the lender requirements and, it's not because your property is an investment property. Anyone that told you that is mistaken. It's probably (For sure) because you do not have the requisite loan to value. Pay it dow to meet the lender guidelines or, pay the new amount, or pay it off.
There are no tricks or other alternativese to accomplish your objective.
I agree with the others that your lender can't prevent you from refi-ing with a different lender, but I think Ron brings up the most relevant point - you're underwater, so no lender is going to refi it. The fact that it's a rental is irrelevant. This is what happened to lots of people back in 2007-2009: they got a ARM because they either bought when the market was hot, or got a HELOC when the market was hot. Then when their ARMs adjusted, they couldn't afford their new payments, banks wouldn't refi their loans because they were underwater, and they lost their homes to foreclosure.
Your options are as Ron said - pay down the equity line enough to be able to refi, suck it up and pay the extra each month, or pay off the equity line completely. We don't know how much cash you have or how much the equity line is for, so that will affect which options are available to you.
Have you been paying I/O on the 1st mortgage as well for all this time? How much do you think the home is worth based on sold comps in your area over the last 3 - 6 months?
How much do you owe on this home?
How about a HELOC on your primary to pay off the PNC equity line?
Can you refi your primary and roll all 3 mortgages under one? Primary money is super cheap right now.
@Aaron Montague Another good idea. I had not considered it, because I am planning a major renovation on my primary within the next year or two, so I don't want to mess with the equity. Perhaps worth a look.....
is this a recourse loan? If non recourse, consider just walking. Or threaten to walk, and then they'll negotiate with you. Banks won't write down principal, but they'll extend amortization.
if you signed a personal guarantee, then you can take a hit on either your credit or your wallet. Choose one.
Thanks all. The best part about this community is getting sane advice from other experienced folks who are not biased. I knew the reality, just needed a reality check.
I called several other lenders, and none of them will touch it. (including my primary lender) It is recourse.
My choices are clear. I think I'll write the check and pay off the HELOC. I don't want to take the hit each month because I am too busy to deal with a dud - and the market value won't likely appreciate that high again any time soon based on the metrics I'm seeing.
Like ripping off a band - aid...better to just do it quick....and move on. Thanks again!
I dont know anything about your value or your payments, but on the surface I would owner finance a sale to a buyer on a lease-purchase. There are a ton of buyers who cant go to banks and get loans right now. Many of them are close to qualifying. Find a near qualifier to take your payments, and then cash you out at some future time when you property isnt under water and they can qualify for a loan. All you need is someone who has the dream of ownership and enough income to make the payments.
To your success
@Josh Caldwell Lease option! I did think of that about a year ago, but it slipped my mind. Interesting. My mortgage payments are higher than market rents in the building so on the one hand a person might not want to pay more that what they know they can rent another unit for, but if you dangle to dream of ownership at them, it may be a possibility. And, isn't there usually an up front option fee associated with a transaction like this? Thanks!
Read your HOA bylaws on
Lease with Option
Some will allow, some will not
I HATE friggin' HOA restrictions
@Tim Walls there is only an up front optin fee if you want an up front option fee. In general the option fee is a way for an investor to make a quick chunk of cash on a deal. As the owner of a property that is upside down, you dont need that fee but it might be nice to see if you can get a fee and have someone who will take over your debt.
If the issue with financing is based on property conformity with FNMA underwriting (examples include investor ownership ratios >50%, etc.), I would guess that no one will be able to get financing. So the premise of a L/O buyer cashing you out.... well, that has a high likelihood of not working out. In these cases, the L/O path doesn't seem appealing.
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