Boston Property Management: How to refinance a second property

Boston Property Management

Boston Property Management: How to refinance a second property

2015 is a good year to refinance your secondary property because mortgage rates are low. So if you have another property, this is the right time to get it done. The good thing is that lowering it by even one point will help you save thousands of dollars over the long run.

It can be a task to get refinancing for your secondary residence because of the new rules post the housing crisis. Experts state that you need to provide tax returns, your bank records and proof of income in order to qualify.

Higher rates for second-home refinances

You will have to pay a higher interest rate on the refinance of your secondary property. This could be a one-eighth or a quarter percent more than you pay for your primary home.

Fannie Mae usually adds an investment property surcharge which can be from 1.75 of the loan amount for mortgages of no more than 60 percent of the property value, to 3.75 percent for 80 percent loans. That translates to a rate increase of 0.5 percent to more than 1 percent.

Boston Property Management: Home equity

You will get refinancing only if you have equity in your property. If you don’t have equity which is 20 percent then it will be difficult to refinance it. There might be some lender who can give you refinancing if you have 10 percent equity but you might have to pay a lot extra for it. This could also be the cost of private mortgage insurance which can add 1 percent to the amount.

The difference between a second home and an investment home

Lenders do tend to distinguish the difference between an investment home and a second home. If you need the income from your secondary property to cover the mortgage property, then it’s an investment property. If you can pay the mortgage without that cash flow then it is considered a second home. This is why not all lenders will refinance investment homes.

A lender will consider a property as a secondary home, if it’s at quite a distance from your home. For example it can be further away in the city or could be situated next to a vacation spot. It also needs to be around 50 miles away from your home.  In the event that it is near your property, then it will be treated as an investment property. Plus it also needs to be occupied by the owner for some portion of the year. If it does not fulfill those conditions, then it will be treated as an investment.

We hope you liked our guide “Boston Property Management: How to refinance a second property”.

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