Second Mortgage on Investment Properties
I currently have 4% loans on 9 of my residential rental properties with LTVs around 30-35% and would like to cash out some of my equity in order to make other investments. My mortgage broker recommends cash-out refis which would provide me the liquidity but then substantially increase the interest on my current debt as well as the cash out. Has anyone had any luck obtaining second mortgages on rental properties, which would then allow me to leave the 1st mortgages in place at the lower rates? If so, any lender recommendations?
- Rental Property Investor
- Hanover Twp, PA
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@Scott Mukensnabl, I like the fact that you are trying to think outside the box. However, I don't think this will work out for you.
I think the piece of info you are missing is that 2nd mortgages have HIGHER interest rates than first mortgages. So, you have mortgages at 4%, and maybe today you can do a cash out refi at 5.5%. So, you would rather keep your existing 4% mortgages and get second mortgages for the cash-out monies but that rate might be 8%!
Second mortgages generally have MUCH higher rates because if they ever have to foreclose the first mortgage gets paid first and there is often no money left to pay them off.
I would do cash-out refis and FAST and focus on FIXED rate loans as interest rates are expected to keep going up and may not be lower than they are today for a long while. Rates today are still below historical norms. So, get loans while the gettin is good!
Quote from @Scott Mukensnabl:
I currently have 4% loans on 9 of my residential rental properties with LTVs around 30-35% and would like to cash out some of my equity in order to make other investments. My mortgage broker recommends cash-out refis which would provide me the liquidity but then substantially increase the interest on my current debt as well as the cash out. Has anyone had any luck obtaining second mortgages on rental properties, which would then allow me to leave the 1st mortgages in place at the lower rates? If so, any lender recommendation
I'd suggest going into a local credit union to see if you can get a line of credit. They will use full documentation like tax returns and income to qualify.
Another option would be to cross your other properties to purchase properties with a lower down payment going private money. Then refinance the new purchase.
@Scott Mukensnabl
Hey Scott! I'm in WA state too and we do bridge 2nd position loans for acquiring properties. Depending on your need, if it's short term, that may be a faster solution and likely cheaper since cash out refis have gone up in rates and costs.
The other option if your rentals are not in WA could be to find a private lender willing to fund in 2nd position at a conservative LTV behind your bank loans. Lots of investors are looking for safe places to keep their money and short terms show them to keep it somewhat liquid and get you what you need for cash. Happy to float other ideas your way depending on the cash needs - long term, mid or short.
Quote from @Kevin Sobilo:
@Scott Mukensnabl, I like the fact that you are trying to think outside the box. However, I don't think this will work out for you.
I think the piece of info you are missing is that 2nd mortgages have HIGHER interest rates than first mortgages. So, you have mortgages at 4%, and maybe today you can do a cash out refi at 5.5%. So, you would rather keep your existing 4% mortgages and get second mortgages for the cash-out monies but that rate might be 8%!
Second mortgages generally have MUCH higher rates because if they ever have to foreclose the first mortgage gets paid first and there is often no money left to pay them off.
I would do cash-out refis and FAST and focus on FIXED rate loans as interest rates are expected to keep going up and may not be lower than they are today for a long while. Rates today are still below historical norms. So, get loans while the gettin is good!
I just did a fixed rate at union bank, 4.99% with autopay and 25k held in accounts. if you have the cash to park it's a good deal.
@Jordan Feiner what Union/bank did you end up going with for your second mortgage? We are thinking of doing the same thing
Quote from @Emali Taylor:HELOC
@Jordan Feiner what Union/bank did you end up going with for your second mortgage? We are thinking of doing the same thing