Investor · South Central, KY · Member since 2015 · 14 posts · 1 vote
I am currently working on my second real estate deal and my first loan for an investment property. I'm working with a loan officer at a small bank that I have a good relationship with and have done things with in the past. The property is a six unit with great cash flow currently priced at $169,000. The bank I'm dealing with will only do a 20 yr fixed if they can have a $130,000 mortgage on my primary residence which is paid off. If I don't use my home the terms are 20 yr with a 5 yr lock at the same rate. Is this typical or should I start shopping around?
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
11y
@Jon Begley I have two commercial loans and those are almost exactly the terms. Yes, the loans are against the rental property itself.
Is the subject property you're getting the quote for 5 units or more? If not, consider shopping around some more. I have single unit rental properties with standard 30 year terms.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
11y
Yes, 1-4 units is residential, over that is not.....hence the reason for the difference in terms, in addition to your primary residence being owner occupied.
Yes, 1-4 units is residential, over that is not.....hence the reason for the difference in terms, in addition to your primary residence being owner occupied.
I'm sorry, I probably didn't explain my situation very well. I intended to get a loan for $130,000 for the rental property. They gave me two options. I could have a 20yr loan with 5yrs locked in at 4.5% and the rental stand good for the loan or I could have a 20yr fixed at 4.5% if my home stood good for the loan. I'm just wondering if it's typical for people to have 20yr fixed loans on investment properties without providing other forms of collateral.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
11y
@Jon Begley I have two commercial loans and those are almost exactly the terms. Yes, the loans are against the rental property itself.
Is the subject property you're getting the quote for 5 units or more? If not, consider shopping around some more. I have single unit rental properties with standard 30 year terms.
Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
11y
If you are good with the payments that x will be due with a 20 year amortization, I'd take the loan on tge primary for 20 years, locked in at 4.5% for the fulll 20 years vs only 5 on the loan against the investment property. In the future if rates go up (they will), you won't necessarily have to refinance. If they improve, you can if you want to. I would ask your friend at the bank if that's the lowest rate he can get you. It's a little high for current market on a 20 year fixed on a primary residence, unless your getting a bunch of lender credit to cover closing costs. Also, see what the 15 year Rates are. If it were me, I'd be inclined to do the 15 year.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
What about getting a mortgage on your home from a different lender? Leave the 6-plex out of the equation (with the bank, anyway). Not sure if it's called a home equity loan if they are getting a first. Primary 15-20yr rates could be better than 4.5%. Mine's a 2-fam, 15-yr at 3.375%.
That is all predicated on you being ok with leveraging your home of course, @Jon Begley May be able to get the whole $160k if you want to. Congrats on having a paid off home, btw. That's awesome!