Which way would you go?

3 Replies

So we are about to Cash-out refi two of our rental properties in a blanket loan. We hold both of these in an S- Corp and have had them for a little over a year. We paid cash for them. All in about 110k total. They are both 4 units. They still need to be appraised, but I am assuming they will appraise for about 150k.

Rates seemed a bit high. Not sure if this is because it will be through the S-Corp and they are commercial.

Which option would be the best and why?

LTV: 70% of appraised value

Option1: A fixed rate of interest of 5.25% for the first five years. Standard Rate Call Provision to apply to years six through ten.

Option 2: A fixed rate for ten years 6.25%

Term of Loan: 10 years

Amortization: 20 years

Thanks!

The rates are higher because they are probably portfolio, and not conventional loans.  To get a conventional loan you would need to have them in your own name.  Up to a four plex only.  Keep shopping though, I think you might find a lender who will do better on a portfolio loan 

the rates could be higher for a number of reasons: the fact that it's an investment property, your credit score, the property itself (number of units), and of course, the LTV. as well, if it is portfolio lender then your rates will be higher - across the board for everything. they have to be as a portfolio lender assumes the risk of your default.

look for a mortgage banker or broker in your area.  they'll have the greatest number of options for you. 

good luck

Thanks @Jon Klaus   and @Patrick Britton  

I assumed they were higher because of this. They are a smaller local bank as I tried with a larger one already. Wasn't sure if these rates seemed high or normal right now. 

If this was the only way I could go, which seems like the best option? The rate for the 5 seems much lower. I would assume we could pay it off in 5 years if we needed to, or is it always good to just go ahead with the longer term. 

Also, I cannot tell if option 1 is also set at 20 year amortization or 10 year. Help? I would just like to keep the payments as low per month as possible. We are planning to take the cash out and do some flipping with it. 

Thanks guys!

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