I need to refinance my homestead/rental . I would Appreciate some guidance

[Jacob Olivos]

I have a 4 bedroom that I have on a owner finance mortgage that I have as my homestead, I rent out 3 rooms (as I am a single man no kids no animals) the benefits are great because I can live in the property and still get a small return, anyway I have a 3 year balloon and I am coming up on 2 years in September. I would like to refinance or sell and do a 1031 exchange ,but preferably a refinance to keep control of the property , to give numbers I have a 8 percent owner finance and I have between 30-40 thousand in equity I am looking to get some cash out If possible. Please respond with possible advice referrals to brokers and ways to finance this property as soon as possible

[Albert Bui]

Originally posted by @Jacob Olivos:

I have a 4 bedroom that I have on a owner finance mortgage that I have as my homestead, I rent out 3 rooms (as I am a single man no kids no animals) the benefits are great because I can live in the property and still get a small return, anyway I have a 3 year balloon and I am coming up on 2 years in September. I would like to refinance or sell and do a 1031 exchange ,but preferably a refinance to keep control of the property , to give numbers I have a 8 percent owner finance and I have between 30-40 thousand in equity I am looking to get some cash out If possible. Please respond with possible advice referrals to brokers and ways to finance this property as soon as possible

 HI Jacob,

If you live there it is not considered investment property (like for like exchange). I recommend you get some advice on the 1031 aspect since its usually for an investment property which is not your primary but in any event you could potentially sell for partial to little tax as a primary home if you've lived in this home as a primary home. In most cases if your accountant claimed depreciation on the portion of your home used for rental activity or home office activity you may have whats called depreciation recapture at 25% of that portion claimed/gain.

- can you cash out if you have 30-40k in equity? it depends on the bank you go to, conventional financing can go to 85% cash out with MI on a primary. Will local lenders offer you a line of credit up to 90-100% of market? sure, its a possibility as well. Some banks can offer this most notably in 2nd position behind your first mortgage cash out loan (conventional). These banks tend to be local community banks or credit unions.

- The other question is will you qualify for a loan or a line of credit so you'll need to check your credit, assets, and income -?? 

- One method is 85% cash out using FHA since FHA will allow use of rental income from "boarders/roommates," while conventional financing will not, down side is hefty monthly MI payments but the effective overall rate is still much cheaper than your current of 8% with 3 year balloon

- it also depends on how you file your rental income or if you dont file it and take the rental income as cash this can change the characterization of your property from primary, to rental, etc (how loan underwriters will look at it)

The above is how I would review this file from from my perspective feel free to add any info about your scenario or PM me if you have any particular questions.