So I called a mortgage brokerage that was recommended to me to do a cash out refi. on a property that has plenty of equity. My credit is over 800, very little debt, I have a bunch of cash flowing properties, and secure w2 job making over 100k a year. I gave this one lender my info and they got back to me saying they can do a 30 year commercial loan at around 5% for 1 point to do a 120K cash out refi. I quickly agreed and started sending them all the paperwork required.
A week later, they sent me the conditional approval and it is a residential loan and has a 5.5% interest rate. I called the agent that I was working with and he forwarded me to his supervisor because he could explain it. The supervisor said that she tried to get a commercial lender to take the loan but they did a drive by and for some reason, denied the request. What the hell does that mean? Commercial lenders drive by the house to see if it's worth it to lend on?
It's a 2 family house that i'm refinancing so the agent told me that I can just roll it into my LLC after closing. Not what I wanted to do. And they never told me that this was a residential loan. I had to ask. So then I asked about the interest rate and they said it should be around mid to high 5%. What!? When we first started, I was told I would get around 5% on a commercial 30 year and now i'm in a residential loan for way over that. Shouldn't a residential loan be less expensive that a commercial? They said I wouldn't have to pay a point for the residential but I said that I wanted a lower rate. They said that we have to wait until the appraisal then once they determine the loan to value, then they will get me my interest rate on this loan.
I'm very uneasy about this company right now. They want me to send them my credit card info so they can order the appraisal but I told them I'm unsure if I want to do that. They said that if I pay for the appraisal, even If I don't go with the as the lender, I could bring the appraisal to any other lender and they would accept it so I wouldn't have to get it re appraised....Is this true? ahhhh.. I don't trust them....but at the same time, i'm not a lender and I don't know there rules....ahhhhh...help!
No commercial loan is a 30 year fixed, residential loans only. And no, another lender will Not use a previous appraisal.
There are commercial lenders that do 30 year fixed and I have worked with a handful. You’ll have to do a new appraisal but that is just $500 and with a rush can be done in a full week.
I am surprised that they say it can be rolled into an LLC after? I have never seen that because when you quick claim it to the LLC the mortgage will have to be satisfied as it will be on title unless I am missing something. A residential loan will be on your credit report as well which can affect future financing for you. I agree something doesn't seem right.
I mentioned to them about moving house into LLC afterwards and they said I would be able to roll the deed into the llc but the loan itself would still be under my name. I have heard of people doing this and most banks wont call you out on it. This broker mentioned that the company buying the loan from them allows purchasers to put the deed into LLC. That's all good and dandy but the fact that they didn't even tell me this bothered me. Then when I called, there reasoning about how the commercial lender drove by the property and decided not to do the loan sounds really fishy.
After discussing this with a few fellow investors, I'm ok doing a residential and rolling it in afterwards because the terms and rates are usually better than commercial. Again, just wish the communication was better.