Combine 2 mortgages to 1 when refinancing or not?

Question

Our portfolio lender offered to put 2 of our duplexes under one mortgage when we refinance.  I'd like opinions on this.  I know it makes it easier for the bank as far as paperwork but my gut tells me to just keep them separate.  I feel it'll be easier on my eyes with paperwork and numbers when it comes time to trade one of them up, by having them separate.  As far as cost goes to refinance 2 properties and have one mortgage, it doesn't change the cost at closing.  What about tax time and mortgage interest deductions?  Thanks in advance.

Oleg Shalumov · Answer

@Korie Apgar, normally the problem with the blanket mortgages is when you want to sell one of the properties ... double check with the lender if it is possible or not.

Korie Apgar · Answer

Thank you.  Yes, the lender does allow separate releases of the properties if we were to sell.  I will be inquiring with an attorney and the lender about LLCs and how it would affect one mortgage vs 2 and how the LLCs would need set up.  The properties will most likely need to be combined under 1 LLC if they are under 1 mortgage.  I'm also still deciding how much property value/equity I'm comfortable with putting into one LLC.

John Leavelle · Answer

Howdy @Korie Apgar

Have you discussed with the lender what your concerns are?  Some portfolio lenders allow separate releases when multiple properties are financed (refinanced) with one loan.  This allows you to sell them individually or in groups.  Ask them if they allow it. Find out if they provide some means of identifying amounts associated with each property.

Some portfolio lenders may require you to purchase (refinance) using an entity (LLC or Corp) when multiple properties are involved.

I am not a CPA or accountant, but, I don't think your tax filing change much.  You still claim the interest no matter if it's one loan or three.  The only change would be if you create an entity to manage the properties.  Check with your CPA.

If you are planning to keep adding properties to your portfolio you will have to start using these lenders eventually.

Good luck.

Vince Gethings · Answer

Hi Korie,

I'm in the same boat as you. I'm eager to hear what the community has to say..

Combine 2 mortgages to 1 when refinancing or not?

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