Getting a mortgage on properties purchased on a personal loan?

Question

My friend owns about 7 properties in Rochester, NY that he purchased through a variety of personal loans.

To my understanding, he can’t refinance his properties (or can he?) because he doesn’t have a conventional loan on any of them.

What ways would he be able to get a mortgage out on all his properties to bring down his interest rate and wrapping it all into one loan?

FYI: He owes under $100,000 for all 7 properties combined.

Looking forward to hearing from you guys!

Marc Winter · Answer

A refinance has nothing to do with the personal loans on the properties, so long as the personal loans are not in the form of a mortgage, and they don't affect your debt to income ratio.  Oops, I meant your 'friend'.

Refinance through a bank, s&l or credit union and they will check the title, do appraisal(s), check your "friend's" credit, income etc.  The costs, term, and interest will depend on the lender and your 'friend's" qualifications, and that the property appraises for the amount applied for.

Your final question is concerning a 'blanket' mortgage.  That is one loan covering several properties.  Check with your attorney and/or mortgage consultant to understand fully the benefits and shortfalls of a blanket mortgage.  Can it be done?  Yes, of course.  Should your "friend" do it?  Best check it out in detail with qualified professionals.

Matt Honeyford · Answer

There are only two things that I can think of that could possibly hold him back; credit score and cash available. If he doesn’t have a good credit score I do not believe he will be able to secure a commercial loan. And, if he needs to come up with cash to refinance and doesn’t have it, that too could present a challenge.

Derek Dombeck · Answer

I would go to your local REIA and ask people there if they know anyone who has an IRA that has 100k in it. Approaching people to find that small dollar amount is easier than you think because many people with smaller balances are less sophisticated investors and are excited about lending on Real Estate with equity. I don't like taking property with private lenders already in place and going to institutional lenders. There's alot of private money if you just start asking the right people.

Albert Bui · Answer

As long as you qualify with these personal loans whether on record, recorded against properties, or off record in which case you'll be required to state if you have any other liabilities (unless you dare not commit mortgage fraud) when you're going through your credit qualification with a lender.

So basically if you qualify you'll be fine, get your money out then pay off your friend or or whomever your private/personal/associate/friendly lender is.

Aim for 700-720 + fico, under 45-50% DTI (some rare cases higher), if you're going commercial hopefully you have min 1.20-1.30X DSCR depending on what local lender you're going with or higher, some decent cash reserves 6+ months and you should avail yourself to 95% + of the lenders out there.

Dennis Callaghan · Answer

Locally Canadaigua National Bank does portfolio loans as you mentioned. Slightly higher rate and they adjust to the market every 3-5 years depending on how you set it up.

Tom S. · Answer

@Anthony Richards  I've done a blanket loan across a few properties before and still have the loan to this day.  You'll probably have to reach out to smaller local banks / credit unions in your area and talk to the commercial lending department.

No issues on my side doing it, you just have to keep in mind if you sell a property your loan may have to be re-evaluated.  However, if you have appreciation or principal pay down, or both, the collateral may still be sufficient.

Expect to pay a little higher on the rate.  Mine is 6% for a 15 year term, fixed rate, but originated at the time when investment loans were in the 4.5 - 5% range.

Good luck!

- Tom

Larry Turowski · Answer

@Anthony Richards Like @Marc Winter said, of course he had get a mortgage on them if he meets the lenders other qualifications: seasoning period, debt-to-income, credit score, etc.  And as for lenders not lending on low value properties, you can wrap several or all up in one and get a blanket loan.

So how much did he buy these properties for?  I'm assuming he's got some serious equity.  I know properties are cheap here, but they are not $15K cheap unless they are atrocious homes in atrocious neighborhoods.

Getting a mortgage on properties purchased on a personal loan?

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