Can I buy a condo from myself?

Question

Hi All,

I have a condo which I bought in full, in cash (no mortgage) a few years ago. I tried to refinance last year but due to the fact that more than 10% of the condos in the association are owned by 1 company I am unable to get a federally backed loan (a condition I didn't know when I bought it) and the private loans I received prices for had 9% interest which means the condo would not cash flow.

It is in a great up and coming area so my goal is to keep the existing condo, but I want to release the capital to invest in further properties.

I am therefore wondering if I can take a federally backed mortgage, at the lower rates these offer, to buy the property from myslef and release the capital I invested as a refinance is too expensive.

Any thoughts/suggestions would be much appreciated.

Thanks, Alex

Alex Muirhead · Answer

I will have a look at more local banks but I did try a few.

I have about $100k in it at the moment. I want to get $80k out to use as down payments on other rental properties.

Jeff Dulla · Answer

@Alex Muirhead How much equity do you have in it now?

Andrew Syrios · Answer

Have you talked to any local banks? They're usually the best when it comes to things that federally insured type mortgages won't lend on and they'll certainly give you a better rate than 9%. Although many of them don't like condos in my experience. But you only need to find one.

Alex Muirhead · Answer

Thanks @Jeff Dulla,

I will look into more banks but I did look at quite a few last year and the interests got up really high for anyone that would offer the refinance. I tried for a variance but was unsuccessful.

I am worried that if I try to sell it the new buyers would not be able to take a Freddie/Fannie mortgage on it either because of the "non-warrantable" nature of the over 10% single ownership thing. Is that this case? If not I may just try to sell it.

Can I just sign it over to my girlfriend then buy it from her?

Cheers,

Alex

Jeff Dulla · Answer

@Alex Muirhead Talk to more lenders. I would love to help you but I cannot do loans in Virginia.

Some banks will have a very competitive portfolio product to work with. Very similar to normal conforming loan products. If that is the only thing that doesn't fit into the Fannie/Freddie box, you may be able to get a variance from Fannie/Freddie directly. Or the portfolio lender may make an exception.

If not, there are non-prime/portfolio lenders that will for sure do what you would call "non-warrantable" condos. Meaning the condo is not warranted by Fannie/Freddie. If you have a good credit score and are putting a decent amount down, you can get the rates down to a level that isn't much higher than market rate for conforming loans.