Refinance a traditional mortgage into a commercial loan

4 Replies

Topic:

Is it possible to refinance out of a VA loan, traditional mortgage, and personal loan into a commercial loan?

Situation:

I am in the process of a deal that includes two separate but identical triplexes that are on two separate lots which connect. Each triplex is on the market for $175K. They are each appraised at approximately $155K.

Tools at my disposal:

VA loan, personal loan, and a traditional loan.

Structure of deal:

I would like to purchase two triplexes for a total of $300K and structure the deal as such:

Triplex A: traditional loan + personal loan. I would offer a traditional loan at 70% of 155k= $109k. The 20% down payment for this traditional loan would come from a personal loan at $21.8K.

Triplex B: Use VA loan at above market value for $191K.

Conclusion, the purchase of both units would total $300K.

Break Down:

Personal Loan at $25K @ 6% interest for 5 years = $483.32 a month

Traditional Loan at 109K: P&I $464 + insurance $67 + Taxes $75 + = $603

VA Loan at 191K: P&I $1,000 + insurance $67+ taxes $127= $1,194

Total expenses= $2,281

Earnings/ Rent:

Currently at $500 per unit (could raise to $550) x 5 units = $2,500

1 roommate at = $250

Total $2,750

Conclusion:

At the end of 12 months of occupation I would like to roll these three loans into a single commercial loan at $300K + 20% down at $60K.

Topic for discussion:

Has anyone heard of such a method i.e., Rolling other loans into a commercial loan due to the fact it would be 6 total units?


Originally posted by @Vance Van Krieken :

Topic:

Is it possible to refinance out of a VA loan, traditional mortgage, and personal loan into a commercial loan?

Situation:

I am in the process of a deal that includes two separate but identical triplexes that are on two separate lots which connect. Each triplex is on the market for $175K. They are each appraised at approximately $155K.

Tools at my disposal:

VA loan, personal loan, and a traditional loan.

Structure of deal:

I would like to purchase two triplexes for a total of $300K and structure the deal as such:

Triplex A: traditional loan + personal loan. I would offer a traditional loan at 70% of 155k= $109k. The 20% down payment for this traditional loan would come from a personal loan at $21.8K.

Triplex B: Use VA loan at above market value for $191K.

Conclusion, the purchase of both units would total $300K.

Break Down:

Personal Loan at $25K @ 6% interest for 5 years = $483.32 a month

Traditional Loan at 109K: P&I $464 + insurance $67 + Taxes $75 + = $603

VA Loan at 191K: P&I $1,000 + insurance $67+ taxes $127= $1,194

Total expenses= $2,281

Earnings/ Rent:

Currently at $500 per unit (could raise to $550) x 5 units = $2,500

1 roommate at = $250

Total $2,750

Conclusion:

At the end of 12 months of occupation I would like to roll these three loans into a single commercial loan at $300K + 20% down at $60K.

Topic for discussion:

Has anyone heard of such a method i.e., Rolling other loans into a commercial loan due to the fact it would be 6 total units?


Vance, from what i understand, you should be able to get a commercial loan.  But of course as i am not a broker,  i am interested in hearing an actual broker chime in this thread with thier qualified answer.   

What i am also curious about is why would you attempt to pay above market for Triplex B, especially after working to negotiate for 70% on A?  

Typically with a VA loan, you will find it difficult to obtain a loan above the appraised value. For instance, I had an offer at the asking price of $395K accepted by the seller. The appraisal came in at only $385K in which my lender would not pay a dollar more than that appraised value. Great for me as i saved $10K (this type of instance is why some sellers will not accept offers with VA financing). All I'm saying is contact your VA lender and get thier ruling on whether they could finance above the appraised value.

Good luck and please follow up in this thread with what you find out.

@Vance Van Krieken as the others have stated, VA loans will only go up to appraised value, as far as I know. Your second hurdle is that a traditional lender will, generally, not allow for the down payment to be borrowed funds. I like the creativity, but you have a few obstacles in you way

Gentlemen @Jason D. , @Mark Creason , @Matthew Rayl , thank you for the responses and advice! You were all correct and I was unable to secure the deal for the reason you all mentioned.

However, another opportunity presented itself. I am in the process of closing on my first house/ deal. Its a single family, 3 bed, 2 bath, 2 car garage (attached), 1500 sq ft, built in 1999. It was through HUD and therefore needs some love, but not much. I plan living in it over the next year and then turning it into a rental. Can't wait to get my hands dirty!