Second Property Challenges
Good evening folks!
I am currently attempting to move into my second househack. However, I have run into an issue. I am locked into a first time homebuyers loan and I either have to refinance or pay it off to get rid of it. One of the requirements of this loan is that I have to be living in the property. I have talked to several different lenders and they have all told me the same thing, that I cannot keep the loan and simply move out and get another owner occupied loan. It is state specific to Utah and is a Utah Housing loan. I got it at a 2.75% interest rate and lenders are currently telling me rates are around 6% now. The current payment is $1925 and the new payment would be approximately $2440. I will be bringing in about $2200 a month once I move out.
I would have been cashflowing $275 but now I will be losing $240 per month if I decide to refinance. However, I know getting more properties will pay off in the long run. I am not worried about paying $240 a month to keep this property. I am just curious to hear what experienced househackers have done in situations like this if they have ever encountered them. Should I refinance and buy another property? I have about $30k saved up for a down payment. Or should I sell the property so that I can avoid negative cash flow?
ANYTHING HELPS.
Thank you so much!
Jayden
Jayden. Just PM’d you. I am in my second house hack currently
Jayden I also messaged you. I'm in your area and believe I have some options for you.
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Real Estate Agent Utah (# 12669906-SA00)
#2 General Landlording & Rental Properties Contributor
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#2 General Landlording & Rental Properties Contributor
Even if the current payment is $1925 and you'd be making $2200 a month, that is cutting it close. Does the $1925 include taxes and insurance? You also have the refinancing costs to factor in.
What about looking to buy a duplex instead? how much equity do you have in your current house?
@Jayden Espinosa I agree with @Theresa Harris --negative cashflow on a property would put you on thin ice (particularly if you're just starting out and don't have a massive portfolio and stack of cash to fall back on).
If it makes you feel any better, a LOT of folks (myself included) are in a similar position to yours right now--they have an excellent interest rate and are experiencing the "lock in effect" (where it doesn't make much sense to exit one property that has a low rate just to jump to another property with a much higher rate).
Because of this, a lot of folks are choosing to sit on the sideline for a bit to see what plays out over the next 3-12 months. Price reductions, days on market, and inventory are already increasing. Your rate on your current home is INCREDIBLE (and there's a decent chance a better rate will never be available again in our lifetimes)--you'll only want to abandon that rate if it gets you into an INCREDIBLE home-run, low-risk deal (which are almost non-existent right now).... ...If you're reasonably happy with your current place, it may be worthwhile to just sit tight for a bit, save more money, and let the higher rates do their work on the market (and perhaps look for an off-market deal in the meantime).
If you do decide to make a move now, you'll want to be very conservative with your financial models. We are clearly in the midst of a rapidly shifting market, and people who make the wrong moves right now can easily end up in hot water (for instance, going upside down on the mortgage if prices continue to drop, having insufficient cashflow because of the high rates, etc., etc.).
Do the limits of your current mortgage expire at some point? (for instance, if you live in the house for X years, are you then allowed to move out without refinancing?).
Good luck out there!
Hey Jayden, I just sent you a message. I would love to hop on a call with you and dig deep into these issues you are having and help you come up with a plan.
#4 House Hacking Contributor
- Real Estate Agent
- Los Angeles, CA
Instead of expanding your portfolio with buying more properties, can you expand on your existing one? For example, creating a second unit within the property. Now you have two units and still on the same loan. Then later on when you are truly ready to move, you could refinanced but now have a "duplex" for the rental income. Especially in Utah where properties have daylight basements.
Alternatively, if there is equity you could sell and buy 2-4 units so do you don't lose out on the unit count. It's not ideal but it is what it is. Assuming you have lived there for two years, if you sell, the money is tax free and you could buy the interest rate down on the next purchase, increasing your cash flow for the long run.
Keep talking to lenders.
The Utah Housing loans are just down payment assistance programs packaged together with FHA loans. I'm not sure if it can be uncoupled without a refi. But I'm not aware of any loan program that requires you to sell or refinance if you can no longer live there after one year of occupancy.
Most likely you will not be able to use the Utah Housing assistance again. But there are plenty of other high LTV programs out there.