Whether you’re wanting to refinance a home you’re living in or an investment property refinance, keep in mind there are jumbo loan limits in California. Loan limits can go as high as $801,950 for a four-unit property.
Refinancing a rental property might be a challenge
If you own several houses and want to refinance your investment properties, it might not be so easy. Equity is the main thing that can get in the way, especial with jumbo loan limits in California. Lenders usually mandate a cushion of 25 percent or more by a non-owner occupied home. Why? An owner with a substantial stake in a house is less likely to default on the mortgage. The concern is you might walk away if you’re upside down on the loan.
Some lenders might be more flexible when it comes to credit scores, income, and cash reserves. But when it comes to an investment property refinance, the 75 percent maximum loan-to-value ratio is pretty much set in stone.
As a real estate investor in California, the last thing you want to deal with during the mortgage process is credit surprises. Be sure to get your credit report before you start the process.
Another problem with a second mortgage on a rental house that can make a refinance challenging along with jumbo loan limits in California, is the lender probably won’t want to remain in the lesser position if the first loan is refinanced. Another term for this is re-subordinate.
If you’re wanting to use rental income to refinance your investment properties, lenders might not be as agreeable to this. They might only allow you to use a portion, if any, of the rent income. However, the lender might make an exception if the landlord is a professional property investor.
Some other restrictions apply to real estate investors in California. For example, most lenders won’t let you have more than four mortgages on residential properties. A lot of that has to do in part to prevent the misuse of government-insured loans.
Of course, there’s always a way around an investment property refinance. If it’s a case of you wanting to move out so you can rent out your current home, you might want to refinance before vacating. However, at EZ Online Mortgage, we do not recommend this since it involves intent and loan fraud.
Technically, a borrower must intend to occupy the property at closing to obtain a new owner-occupied loan. Intention, though, is "subjective and fluid."
Bottom line, don’t let jumbo loan limits in California or other factors deter you from refinancing your investment properties. As a real estate investor in California, you might face some challenges in refinancing, but if you have a lot of equity and a good credit score, you shouldn’t have any problems.