pulling money out of residence - Posted by Bryan

Posted by Bryan Gillis on February 25, 2001 at 15:59:12:

Nate, thanks for the advice. I’ll check out both options.


pulling money out of residence - Posted by Bryan

Posted by Bryan on February 25, 2001 at 08:44:28:


I currently own and live in a condo which has an existing 1st and only mortgage of roughly $48,000. Comps in the area sell for anywhere between $60,000 to $65,000. I would like to buy a rehab property that I would live in and rent out the condo. My questions are these. How do I pull the $10,000 or so in equity out of the condo for use in aiding the purchase of the rehab project and do I need to let the lender who has my mortgage on the condo know that I will now be renting it out? Thanks in advance for any help.

Re: pulling money out of residence - Posted by Sergio

Posted by Sergio on February 26, 2001 at 16:14:40:

see the option of refinancing your house with a 10K Net cash to you (if your goal is to leverage your equity), as owner occupied and you will be getting the lowest interest rate and if you rent it out, see that the rent would pay for servicing the debt. The last thing you want to tell the lender is that you are moving out of the property because the interet you are getting is as owner occupied. In the lender’s eyes the moment you move out the property their loan become a higher risk and if you tell them that the money you take out is going to be used to buy another property which will have another loan. They see that other property as one more liability. Good Luck

Re: pulling money out of residence - Posted by Harley-CA

Posted by Harley-CA on February 26, 2001 at 13:55:12:


You may also consider lease optioning the condo for a price of 70k to someone for a $10k option consideration. Of course you’d be effectively selling the condo but it would give you your operating capital. You could also sell your condo on a “subject-to” or a “wrap” where you create a new mortgage with a new buyer, they make payments to you and you make payments to your lender. Just a few thoughts.


Re: pulling money out of residence - Posted by Nate

Posted by Nate on February 25, 2001 at 14:54:30:

You are already at 80% LTV on the condo. So you will need to find a bank that will go higher on an equity loan. Some of the small local banks may be the best places to start. Or you could find a mortgage broker that does the second mortgages up to 125%-135% LTV.

As to whether you will rent out the condo - my advice would be, when you go in for the second, do not assume you will be renting it out. If you happen to decide to move into the rehab, oh, 6 months later, that should be okay. As long as there is no INTENT to move out immediately, and a reasonable amount of time passes to support that view, you should not need to disclose anything.