Posted by Dave T on September 15, 2002 at 16:58:53:
If refinancing the rental will give you postive cash flow, then that can only help to improve your debt/income ratios. I would do that first.
Now when you do an equity loan or second mortgage on your personal residence, your financials look better on paper.
Financing my rental - Posted by Dennis
Posted by Dennis on September 15, 2002 at 11:23:27:
Dear Folks,
I need some help. A year ago, I bought my first rental home. I went sideways to a private lender for $8,000 (at 15% for 18 months) as a down pmt. I purchased (I’m making her payments, 9.4% on an ARM)the home for $69,000 on a land contract which the owner agreed to hold for 18 months. I assured her I would refinance and pay her off by that time. I have a 3 year old appraisal (her records) on the home which estimated the worth, at that time, at $87,000.
I have rented the home to the same tenant for the last 12 months. I am now wanting to re-finance, take out enough to pay off the side loan and reduce the interest rate. Though there has been no paperwork yet, one bank tells me they could get me in as low as 7% on a non-owner occupied loan. This should give me a positive cash flow, and leave some equity in the home.
I also need to reduce debt and get some upgrades on my own home. This means taking a second on it (already refinanced at 6 3/4% four years ago). My questions are: Do I need to take the second on my own home first (reducing debt to income)? Or, do I attempt to refinance the rental first? Also, I am a neophyte at this, so, if there is any other thinking on this matter which I may be missing, please feel free to comment. I thank you for your time and attention to this matter. Dennis