Refi Primary Residence w/ Intent to turn into Rental

8 Replies

Hi everyone, I just wanted to get feedback on other experiences or considerations regarding the following. It would be most helpful to have some clarity and guidance around this topic. 

My husband and I have recently purchased a home using a VA loan (less than 6 months ago). By the time we may be required to relocate, we will have owned our primary residence for 3 years. We have an interest in keeping the property long term as part of a future portfolio we aspire to build and don't want to keep the VA entitlement tied up in this property. I am curious to understand any limitations and considerations to help evaluate options and strategic planning. Creative financing recommendations are more than welcome.

In short, we have thought of doing a refi shortly before we have to relocate and turn it into a rental. I feel easier said than done and want to have an honest expectation of what we need to do to achieve our goals. Has anyone else done this? What was your experience like? What are some things that are important to know ahead of time? Getting as much information ahead of time can also help us plan to account for any costs or cash reserve requirements we may require over the next few years.

Thanks in advance!

Hi Jennifer,

My first property was purchased with a VA loan. Initially I was told by several lenders that I could only have one property at a time with my VA. The question I have for you Jennifer is, did you guys max out your entitlement? If not or unsure, I'd check with a VA approved lender to see if there's anything left. I ended up renting out my first home and bought a duplex that was much more expensive than the first home. The catch was I had to pay a higher VA funding fee the second time.Hope this helps!

Thanks

@Edgar Claudio thanks for your feedback. I know we have not maxed out the entitlement, however, my concern is we bought our property in Hawaii where the entitlement is adjusted for the high cost of living. When we return to the mainland, I am not sure we would have much left to work with under the standard entitlement to even get a second mortgage. I'm sure it is still worth talking to a knowledgeable VA lending specialist to get clarity although I feel either way we would have to look into a conventional or alternative lending source depending on where the next duty station takes us and if we want to invest there as well. So it always helps to see what others have done in this scenario.

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@Jennifer Griffin

I help borrowers with situations like yours all the time. In Hawaii, with those home prices, I agree you are going to want to free up that entitlement if you want to buy another home in a few years using VA for the low down payment. If you want to refinance into Conventional, FHA, or anything else, if doing as a primary residence you must intend to live there for 12 months. So don't wait until the last minute on that. In fact, if you have enough equity, you might want to look into the refi now while rates are still very low. You'll want to get with a rockstar lender that you know, like, and trust to gameplan your future. It's like chess, one wrong move and you could put yourself in a bad spot down the road.

Best of luck!

@Edgar Claudio

It depends on the number that the VA guarantees. Multiple VA loans can be had. A refinance won't be needed if you would already cash flow. If a refinance shifts the numbers to a cash flow where you'd get some type of ROI then I'd do it.

I VA refinanced a property and increased cash flow of $140 a month and I only had to pay $400 for closing costs. My ROI is 3 months. Clearly a no brainer for me.