When to refinance, and who with

Question

I’m not sure where my question fits in or precisely how to explain it but I’m trying to decide if I want to refinance with a different local credit union for a slightly better rate / term.

And if so, which of my 3 investment properties do I change banks with?
Is there any reason to have all your mortgages and loans with the same bank or is there a reason to split it up?
I’m sure everything will be dependent on situational specifics, and of course I’d first try to turn in my loans with the worse terms.
loans are 20-25 year commercial currently at 4-5% with 7year fix that’s almost up. New rate would be around 3.7% I’d have a lot of math to do to figure out pay off especially considering it’s still only locked for 7 years. But I’m wondering if there’s anything to be said about banking all at the same place vs different lenders

Kerry Baird · Answer

@Eric Mcginn, some banks will let you keep going with them and others only want to carry so much paper (debt) for an investor.  This is where the relationship part of the process comes in to play.  I called every lender in my county and asked questions so as to determine what their "appetite" for lending was.  Some prefer commercial property, some favor the conventional types of mortgages, some specialize in VA loans.  There are non-qm lenders, and so forth.  I suggest you follow Chris Mason.  I have a quote from him:

Savings institutions serve a local community. Might be called thrifts.

Depository institutions (big banks **US Bank** and CUs) and internet lenders are where you want to go to save $37/mo by refinancing to drop your rate 0.125%, or where you want to go when you want a HELOC. That's what they are good at. Middle school stuff. Commercial mortgages, too. (People deposit their savings)

Local lenders, direct non-bank lenders, correspondents, or mortgage brokers (whatever name you want to use), are where you want to go for purchase mortgages and cash out refinances. That's what they are good at. They can't even offer you a checking account or car loan at all, so they must be good for something, and that 'something' is purchase mortgages and cash out refinances.

Right tool for the right job! If you try to get a HELOC from a mortgage broker the rate will be crap (if they can do it at all), if you try to get a purchase investment property loan from a credit union or big bank then it'll take 4 months just to be declined at the last minute because your CPA didn't dot an i on page 7 of your tax returns, etc etc, you get the idea.

Jody Sperling · Answer

Based on the specifics you shared, it sounds like you're working with commercial loans. Given that, you're a bit more used to some variability in the loan product. Have you ever considered a first lien HELOC?

HELOCs in general get a bad reputation because of all the misconceptions about what they do and how safe they are. You already bank with a credit union, so you're familiar with working small and local. Find a bank, the one you're working with or another like it, that will transition one or more of your properties onto a first lien HELOC.

The HELOC will replace the mortgage; the "refinance" into the HELOC will cost a lot less, giving you more capital to invest; and you'll have instant access to cash if you want to buy more property. The rates I've seen are roughly the same you already have, so no sticker shock there, and if you choose to simply pay the line down, it can happen a heck of a lot faster than if you paid down a loan because you can put all your income into the line without worrying about pulling it out in case of need or emergency.

Best of luck!

Eric Mcginn · Answer

Wow excellent information, thank you! I will ask my credit union about HELOC offerings for me. Another thing the potential new banker mentioned (he’s a friend of a friend) is that the current bank might be able to do an “allonge” to extend the current loan with another 7 year rate lock. Another kind semi-issue I’m having is that my most recent investment property purchase was put all on a single loan that’s currently 87% LTV so the loan is also secured by my first property. This is effectively tying up the ENTIRE amount, not just the 12% difference between what’s allowed. They can make changes to put a “release” on it but I need to decide what to do. here’s a quick breakdown of what’s going on

#1 bought 6 years ago, value ~$300k owe $70k on first mortgage. Also has a second mortgage that was the down payment for #2

#2 bought 2 years ago value $275k and I owe $145k on first mortgage

#3 bought last year ago value $160k and I owe $135k on its first mortgage which is also currently secured by property #1

I didn’t fully realize this was the case and found out when I went looking around for a potential #4

My goals are to reduce monthly, and to make equity available to put towards a down payment on one more (larger) one.

I own them all through the same single member LLC

Kerry Baird · Answer

@Jody Sperling, what is your resource for the first position HELOC?  Do you use a national or big bank vs a local credit union?  I am familiar with the All in One that is brokered by Ridge Lending, but didn't think to ask my local credit union.  Thanks!

When to refinance, and who with

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