Refinance Investment Property for Down-payment in Boston, MA

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Refinance Investment Property for Down-payment in Boston, MA

Account Closed
New to Real Estate · Boston, MA · Member since 2019 · 5 posts · 3 votes

Hello BP,

I currently have a 3-family investment property and I'm looking to purchase another property using equity as down payment. 

I just closed on a Line of Credit from my investment property last week; but am now wondering if I should've done a cash-out refinance instead. I've called multiple banks but they will only offers LOC because its not a primary property! Do any banks even offer this if its an investment property? If so, is it still possible for me to apply for this giving that I just closed on a Line of Credit even though I have not pulled any funds out?

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Lien VuongBusiness Member
Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
6y

@Account Closed you definitely can, it's just a matter of closing costs and time for you now. Why do you think it's more beneficial for you to do a cash out refi instead? Since you have not identified property it might be a good idea to have the LoC first so you can properly execute at your convenience. 

If you're still considering LoC, local Credit Unions should be able to do that for you - I have one in mind that would be able to execute 80% of the value of the home for non owner occupied with rates just around 4%. 

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  • Dan K.
    Rental Property Investor · Boston, MA · Member since 2012 · 257 posts · 139 votes
    6y

    Hi @Account Closed,

    You can absolutely do a cash out refinance on an investment property. The process is lengthier than a line of credit because they will go through the entire underwriting process. In addition, you will incur various fees.

    You'll need to weigh the pros and cons. With a cash out refi you'll have the cash right away, which also means you'll be paying interest on it on day 1, rather than a line of credit where you only pay as you spend the money. That being said, with the refinance, you can lock in a fixed rate for 30 years, or various other terms depending on your circumstances.


    Put together a list of 15-20 local banks and just spend time calling them tomorrow. It is a competitive lending market right now.

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  • Nick Foundas
    Natick, MA · Member since 2013 · 86 posts · 47 votes
    6y

    If you just opened a new HELOC then you will probably be charged a fee/penalty if you close it under 1 year of having it open. The fee is probably a couple hundred bucks (you can probably see what the fee is on the banks website under the fine print).

    As Dan mentioned you can definitely get a cash out refi on an investment property, you just need to spend some time calling around small/local banks or credit unions to see who will offer you the best rates and LTV. You also just need to make sure your new loan/mortgage payment after the Cash Out will be supported by the rental income and still gives you a decent cash flow.

    You could ask around other local investors to see who they have used for a cash out refi on an investment property and you will get several recommendations

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  • Jonathan BombaciBusiness Member
    Real Estate Agent · Lowell, MA · Member since 2019 · 1k+ posts · 1k+ votes
    6y

    Hi Leah I know you can definitely do s cash out refinance on an investment property. Jeanne D'Arc Credit Union (JDCU) will do it but they'll pretty much treat it as a commercial property with residential loan terms. They'll do 75% LTV and I think the rates on one of these is about 5% since it's not a primary residence. I can give you a contact at JDCU if you're interested. I'm not sure if all bank will treat it the same way but I don't think this is uncommon.

    Best,

    Jon

    [email protected]978-710-8611
    Candor Realty4.760 Reviews
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  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Account Closed you definitely can, it's just a matter of closing costs and time for you now. Why do you think it's more beneficial for you to do a cash out refi instead? Since you have not identified property it might be a good idea to have the LoC first so you can properly execute at your convenience. 

    If you're still considering LoC, local Credit Unions should be able to do that for you - I have one in mind that would be able to execute 80% of the value of the home for non owner occupied with rates just around 4%. 

    [email protected]
    The Elle Group5154 Reviews
    WebsiteView Page
    1Reply
  • Account Closed
    OP
    New to Real Estate · Boston, MA · Member since 2019 · 5 posts · 3 votes
    6y

    Thank you for the advice!

    @Lien Vuong Wow! I've called multiple banks and local credit unions and the best rate I was able to find for a LOC on non-owner occupied home was 7%. Would you mind sharing the credit union you've used? Perhaps I can give them a call as well!

    I have been trying to figure out what's the best route to take if I want to use equity - a HELOC vs Cash-out. I'd like to buy my next property in the (pricey) Boston area so I'm hoping to put down at least 20% using this equity. I did some calculations and felt like it might be less expensive in the long run if I did a cash-out refinance instead of using a heloc, but I haven't had much luck finding a lender that offers this and didn't know what rate I should expect. I guess I was hoping to get a better rate than the 7% I received on the heloc. But I haven't identified a property yet so maybe an LoC is the better way to go.


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  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Account Closed Happy to make the introduction! Line of Credit might be the best option for this. 

    [email protected]
    The Elle Group5154 Reviews
    WebsiteView Page
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  • Son D.
    Rental Property Investor · boston, MA · Member since 2017 · 202 posts · 222 votes
    6y

    @Account Closed since you already have the line of credit I don't think you have to hurry to do a refi right now. Line of credit should not cost you anything until you actually pull it out. You can wait a while. Who knows how long you find a property that meets your criteria. Worst thing you can do is use your LOC as down payment for new investment then go do refi and use that money to pay off LOC.

    As far as mortgages you can have up to 10 so definitely can have them on investment properties. Not too many people need 1 primary and 9 vacation homes. Local banks or Credit Unions are the best if you have a relationship with them. There are also companies that give mortgages then package them and sell them to other banks. They can have pretty competitive rates because they don't need to keep on their books and risk you defaulting. I found a couple on Zillow. 7% is certainly high right now for residential.

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