Just because a house isn't your primary residence doesn't mean you should overpay on your mortgage. You can refinance a non-primary residence in much the same way as your primary. Different lenders may have more stringent standards for a non-primary residence, but with proper vetting you can find one that works for you. Once you choose a lender, it's a matter of following the lender's procedures and providing all the information its underwriter needs to push your loan through to approval.
Determine if you want a straight refinance or a cash-out refinance. A cash-out refinance pays the existing loan while providing extra money. A straight refinance does nothing but replace the existing loan.
Contact lenders about available rate, terms and fees. Indicate that the property is a non-primary residence and specify whether it is for personal or investment use.
Fill out a loan application, indicating the amount you want including any additional money if applicable. Provide the lender with two years of W-2 forms and federal tax returns and one month of pay stubs. If the property is an investment property, provide a copy of the rental agreement. The lender will include the rent in your total income when calculating your debt ratios.
Sign any applicable disclosures and authorize the bank to run your credit. The bank uses the information in your credit report to determine your total monthly payments. It divides the total payments by your total monthly income including applicable rent. If more than 40 percent of your income is allotted to debt, the lender will decline the loan.
Make arrangements for the bank’s appraiser to view the property. The bank will engage an appraiser who will contact you to gain access. On a rental property, tell your tenants that the appraiser will be stopping by and to grant him access. Reassure them that you are conducting a transaction, but it will not affect their tenancy.
Read the commitment letter carefully when approved. Take note of all closing conditions and fees and make arrangements to comply. For example, you will need to remove your old bank from your homeowner’s insurance policy and list the new bank as mortgagee. Terms and conditions vary by bank and by loan.
Make an appointment for closing. Depending on the transaction, the parties involved can include yourself, your spouse, the bank, a title company and attorney. Choose a date that works for all involved.
Obtain a payoff figure from your existing lender good through the day of closing. Ask that it include a per diem. This is the amount of interest payable for each day the loan is active. If closing is postponed, the bank can add the per diem for every day between the old date and the new date. This eliminates the need to get an updated payoff.
Attend closing and sign the loan documents. Pay any applicable fees. Once closing is complete, the new lender will pay the old lender and your loan will be officially refinanced.
Carl Carabelli has been writing in various capacities for more than 15 years. He has utilized his creative writing skills to enhance his other ventures such as financial analysis, copywriting and contributing various articles and opinion pieces. Carabelli earned a bachelor's degree in communications from Seton Hall and has worked in banking, notably commercial lending, since 2001.