Forgotten Your Password?

Need to Register?

Question Icon

Can i refinance my 2nd home if i plan to rent it out?

I haven't rented it out in 6 months and i only have some seasons. I'm looking to pull out cash for renovations. My daughter lived there and moved away so I'm hoping to begin renting it full time or would it be easier to refinance my first home and use the cash on the 2nd home. Any rules i need to know about? by mikey.tsaller34sd35 from Sioux Falls, South Dakota. Nov 26th 2013 Reply


Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 2,236 contributions

Yes, you can rent it out, but then it is no longer a "Second Home", but a Rental Property, instead (or a NOO property ~Non Owner Occupied Property). We can do cash out refinancing on all property types, but the rates and fees are generally higher for NOO properties. DO NOT try and convince a lender that this is a second home just so you can get better terms. Too many times people don't realize that one of the forms they sign at escrow is the Occupancy Affidavit. If you sign this as a Second Home Occupancy when you take out a new loan, then that is the manner in which you must retain the property. Unlike Owner Occupied, where if after a year your life plans change and you want to move and convert the property into a Rental, you can, most lenders include a special clause that prohibits you from converting a second home into a rental for the life of the loan. If you do, that would be deemed a violation or default of the loan terms and conditions and could result in the lender either foreclosing, or worse, turning you in to the FBI's Mortgage Fraud Division. You don't want either of these to happen. To make sure you don't end up in trouble, read the Note and Deed of Trust very carefully for the lender you are looking at using BEFORE you close escrow. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ Certified by the National Association of Mortgage Professionals and Licensed in California and Arizona ~ www.LoansA2z.com 888-889-9950

Nov 26th 2013
1
0
William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,728 contributions

Cash out transactions are allowed on primary, 2nd home, and investment homes, however the allowable Loan to Value (LTV) is lowest for investment, and if your plan is to rent it out, then you would need to disclose that when you refinance.. you will get better terms If you pull the money out of your primary residence vs. your 2nd/investment property.. .. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Nov 26th 2013
1
0
Phil Dumouchel (PhilDu)
#32 ranked lender in South Carolina - 2,247 contributions

Your best option will really depend on lots more info and a good mortgage lender can help you figure out which is best. The interest rate will be higher for a rental property or for a "cash-out" loan, but lower for your primary residence. You can only get cash out up to 85% for either a rental or your residence. It is also possible to do a renovation loan on a rental property up to 80% of the value of the home with the improvements completed, but not many lenders offer that type of loan. If you like I can refer you to one of our offices in SD to assist.

Nov 26th 2013
0
0
Jason Vondrak (jvondrak)
#221 ranked lender in California - 1,741 contributions

Yes you can. You will however have to pay a higher interest rate on a home that is rented out, as it will be considered a rental property.

Nov 26th 2013
0
0
James Macon (SiouxFallsMortgage)
#5 ranked lender in South Dakota - 17 contributions

Hi Mikey,Excellent question, and both options are possible. Based off of what you have indicated, It sounds like you would be better off refinancing your your primary home and using that equity though. To refinance the 2nd home, underwriters will question whether this is a second home or an investment, you would be capped at a lower loan amount, and would be stuck paying several "points" more for the same dollar amount because of the property classification. James Ray Macon, MLONMLS# 168448Keystone Mortgage18th & Minnesota Sioux Falls, SD 57105www.thinkkeystone.com

Nov 26th 2013
0
0
Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,298 contributions

In theory, yes... As long as you can afford both payments, you shouldn't have any issues.

Nov 26th 2013
0
0
Subscribe to our news feed.