@Thomas Bender There is a potential that it could trigger a “due on sale clause” if the ownership is transferred...even if just from you as the individual to an LLC.
@Claudia Becerra Be sure you are talking to the Conventional Loan folks and let them know it is for SFH or Duplex,... Sounds to me like they are thinking Commercial
@Claudia Starr
I just refinanced three properties with Fannie Mae using my personal name. After closing I switched the properties into a LLC.
In this case the loan is under my personal name with a 30 year loan and I don't have a personal liability on the property.
This is a new loophole that started in 2018 that Fannie Mae let's you do.
Best of luck.
@Thomas Bender There is a potential that it could trigger a “due on sale clause” if the ownership is transferred...even if just from you as the individual to an LLC.
This is not correct Kyle. The mortgage is not transferred when the property is transferred to a LLC. And, the "due on sale clause" isn't initiated if the LLC is owned by the same people who bought the asset in their name. This has been discussed at length on other posts.
@Thomas Bender the bank will likely call the loan, there is a Due at sale clause in your mortgage and a gift of deed to LLC is a sale with no price. Bank will not allow it.
It is not in their best interest to lock in money long term for low interest rates.
@Claudia Starr
If you do the loan in your name you should be able to do it in a 30 year loan. Best I have seen for loan to LLC is 25 year amortization.
@Claudia Starr difficult to find unless its residential. Banks like mine will offer 5,7, and 10 year fixed rates. Keep in mind the further you go out fixed the higher your rate will usually go. We also amortize on a 30 yr schedule and loans dont balloon they become floating rate so you could hypothetically stay in for 30 years. Rate will only adjust if it exceeds your starting rate.
@Thomas Bender
I’m a lender and I’ve seen people do this. The challenge is that it is typically a violation of the loan documents and can trigger acceleration or a call on the loan.
@Claudia Starr
There are lenders that will do fixed rates on investment loans and close as an entity. They are specialty lenders and you should expect to pay more than going conventionally. I would say you would find something in the mid 7’s on a buy and hold. Depending on your profile. Despite the fact that you may be closing in an LLC the lenders will require a clear line to the borrowers as guarantors if the loan.
@Claudia Starr there is another way too. I have a friend who works with investors creating a private bank. The real estate investor uses other peoples money and recaptures the interest they would be paying the bank. It’s a great concept for real estate, but works for other businesses as well.
@Claudia Starr
Yes and yes. I have 30 year fixed in my LLC portfolio. HUD standards, which many traditional banks follow albeit they still hold the loan fund up to 10 properties (1-4 units) under those terms with 20-25% down. There has been speculation of them raising to 12 to 15 properties under these guidelines with the current housing demands but I haven't heard any higher than 10 properties still before you go into commercial lending in my region.
@Matthew McNeil
What Matt said Claudia. Technically it's a default on the terms of the mortgage (assigning the deed over to another entity) so if the bank finds out they can declare a default and call your note due.
My experience...don't tick off your banker. Have a good working relationship (and be honest). It pays dividends in the long run. For example...when I went through my divorce and properties were divided I had some mortgages locked in at 3-4% interest rates. I called my lender. Instead of having to refinance and pay higher interest rates the bank approved releasing my ex-husband from the notes and liability for $300/loan. Honesty and a great relationship saved me $1,000's.
@Claudia Becerra I was actually faced with the same issue. I just recently formed an LLC and with no credit history I was unable to get a loan through my LLC. What I'm doing is getting a loan in my name and then transferring the loan to my LLC. Be sure to asking about any assumptions on the loan and if there is any type of demand feature on the loan that would allow the lender to require early repayment. I'm working with Guaranteed Rate, Good Luck!
@Claudia Becerra check out NBKC bank. You get some savings by using them by virtue of being a BP pro member. Todd Bukaty was my loan officer and he was terrific on a refinance I just did. They'll do 30 year loans without a problem.
Also check out local community banks. Some are more aggressive than others. They typically want a relationship with you so they will give you better rates in exchange for moving money there.
If you are worried about the liabilities surrounded with purchasing the property under your own name, you can increase the limits on your insurance policy similar to what @Brian Ellis said for a relatively low cost - especially for general liability.
As per @Benjamin Haberman's approach, purchasing an umbrella policy will offer you much more protection than merely increasing the limits on your primary policy, however this will come at a premium price.
Both solutions are viable; it just depends on your risk appetite and annual insurance cost your comfortable paying.
@Claudia Starr I do them all day every day. You need to find an independent mortgage broker. They will save you thousands in closing costs and they have many more products available to them.