Just because you don’t occupy a property doesn’t mean you shouldn’t refinance if the right opportunity presents itself. Refinancing a non-owner occupied property is not much different than a primary residence. The only difference is that lenders offer higher interest rates and have stricter underwriting standards because the repayment is often dependent on lease payments. If you don’t maintain a tenant, you might not be able to repay the loan. If you qualify and find the right rate, it can save you hundreds of dollars a month and thousands over the life of the loan.
Contact lenders to find a good match. Compare rates, fees and underwriting guidelines for non-owner occupied properties.
Contact your current lender to obtain a payoff figure with a per diem. The per diem is the interest due for each day the principal balance is outstanding.
Add at least 30 days per diem to the payoff figure. This will give you time to close the loan.
Complete an application and pay any applicable fee. Depending on the lender’s policy, the application fee might be higher on a non-owner occupied property refinance. Request a loan amount equal to the payoff figure with the per diem.
Submit supporting information. Lenders require several years of financial information for all loans. This typically includes two years of W-2 forms and federal tax returns, one month's worth of pay stubs and three month's worth of bank statements. On a non-owner occupied property, the bank also will require a copy of a lease agreement to see what income you receive from the property.
Inform your tenants that you are working on a deal with the bank. You don’t have to go into detail, just let them know that the bank might require access to appraise or inspect the property. Assure them that the process will not have an adverse affect on their lease.
Accept the commitment letter once approved. If too much time has passed and the loan amount is less than the payoff amount, request an increase to the loan or pay the difference out of pocket.
Attend closing and sign the loan documents. These will be the same for non-owner occupied properties as they are for owner-occupied. After a three-day rescission period, the new lender will send the funds to pay off your original loan.
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