We are currently under contract on a short sale, but the property has not been approved as a short sale by the bank or other lien holders. I was speaking with a mortgage broker about refinancing my primary residence and pulling cash out. My question was whether I could refinance the property as a secondary or investment property since we have the contract on the short sale. However, I was told that I would have to refinance my current residence as a primary residence since it is my only property and not I am not generating any income on it. This would obviously be better from a rate perspective.

My concern is that if the short sale gets approved, I would refinance and not live in the property for a year before moving. Does anyone have experience with this situation? I certainly don’t want to do anything unethical, but am unsure as to whether the short sale will be approved in the long run.

Based on my conversation, it seems like my current options are to 1) not refinance or 2) refinance as my primary residence.