Should I refinance my rental for a down payment on a primary home?
Question by lc1216: Should I refinance my rental for a down payment on a primary home?
I mortgaged it as a primary but i still can refinance as a primary since I still live here. So if I rent my current home for about 20% above the mortgage payment. Only 65% of the rental payment counts as income?
I don’t have much equity in the home. I was thinking of refinancing with 10% down, this way I would have 20% to put down on the next (bigger) mortgage. What do you think?
Best answer:
Answer by sassy25
sure if you have enough equity and can manage two mortgages if the rental has no tenant.
What do you think? Answer below!
Tags: down payment, Refinance, refinance as primary, Rental Payment
you would not be the first to use this as a way to obtain more property
is your rental making money now, when you are paying a mortgage on it, you will have losses probably on Sch E
and, paying a home mortgage as well as the rental might be a problem since the rental income might not cover the mortgage payment
and yes, as mentioned, if the rental is vacant for a while
Did you buy it as owner occupied or investment?
You are aware that rental property has higher down payment/equity requirements and higher interest rates than owner occupied homes?
Is there equity in there that you can grab?
And of course this impacts your Debt Load in figuring whether you even qualify for a first mortgage on home. Rental income is only counted at 65% of total.
May be better plan to leave it be, and save up for your down payment. Run the numbers.
It is a dicey move. The amount of debt you are taking on in addition to the rental property will probably put you in a precarious financial position. What would happen if the rental sat empty for a few months? What would happen if you were laid off? What would happen if you became seriously ill or had a bad accident? You have to lay out a worst case scenario and then judge whether or not you could handle it. The fact that you have to refinance to obtain enough cash for a down payment does not bode well.