Refinance from Investment to Vacation Home loan?

[Steven Wachtel]

I bought my first STR in Destin, FL in Nov 2022. It's a non-warrantable condo, so I just accepted my horrific rate and I'm hanging on until I can hopefully refinance and see some real cash flow. At the time I bought it, I lived just a few miles away and I didn't want to play any games with trying to call it a "vacation home" in hopes of a lower rate. I know some people may try to game the system, but I have absolutely no interest in doing anything that even hints at mortgage fraud.

Now ~18 months later, it's been in service as an STR for about one year. I'm now stationed in Colorado, and I definitely wouldn't mind spending two weeks in Destin every year in the off-season. Is there anything that would prevent me from refinancing using a vacation home loan now? I definitely would have done that in the first place, had I lived a reasonable distance away when I first bought it. If it is possible, is there anything else I should consider before talking to lenders (namely, any tax implications). Thanks for any input!

[Andrew Zamboroski]

Quote from @Steven Wachtel:

I bought my first STR in Destin, FL in Nov 2022. It's a non-warrantable condo, so I just accepted my horrific rate and I'm hanging on until I can hopefully refinance and see some real cash flow. At the time I bought it, I lived just a few miles away and I didn't want to play any games with trying to call it a "vacation home" in hopes of a lower rate. I know some people may try to game the system, but I have absolutely no interest in doing anything that even hints at mortgage fraud.

Now ~18 months later, it's been in service as an STR for about one year. I'm now stationed in Colorado, and I definitely wouldn't mind spending two weeks in Destin every year in the off-season. Is there anything that would prevent me from refinancing using a vacation home loan now? I definitely would have done that in the first place, had I lived a reasonable distance away when I first bought it. If it is possible, is there anything else I should consider before talking to lenders (namely, any tax implications). Thanks for any input!

Hey Steven, by stationed in CO I’m guessing you’re in the service, so thank you for all you do!
By vacation home loan, I am assuming you mean second home mortgage? Is it safe to assume the property is still non warrantable? If so, that will be an issue, unless there is a specific bank loan that keeps the note in their portfolio and is okay with the condo being non-warrantable. There are also some other requirements, here is a good general guide:

https://selling-guide.fanniemae.com/Eligibility/Mortgage-Eli...

Can I ask though, what rate did you end up settling for to purchase? There may be other options at lower rates this year if it helps at all!

[Raymond J. Rodrigues]

Hi @Steven Wachtel, I don't see any reason as to why you wouldn't be able to refinance to a second home. You would just have to be able to qualify from a debt to income ratio stand point. I see people financing non-warrantable condos as a second home in the panhandle area all the time. Feel free to reach out with any questions. Happy to help. 

[Jacob Sherman]

The 2nd home and investment rates are practically the same for non qm non warrantable . always best to go investment . You'd need to want to speak to your CPA for individual scenario 

[Simmy Ahluwalia]

What is your current horrific rate?

[Steven Wachtel]

@Andrew Zamboroski @Simmy Ahluwalia

I’m at 9%.  It was as my first investment deal, so I did all kinds of mental gymnastics and rationalization to help it make sense at the time.  Lesson learned.  

[Andrew Zamboroski]

Quote from @Steven Wachtel:

@Andrew Zamboroski @Simmy Ahluwalia

I’m at 9%.  It was as my first investment deal, so I did all kinds of mental gymnastics and rationalization to help it make sense at the time.  Lesson learned.  

Non-warrantable condos can be tricky, so do not feel bad! If you have a good FICO, you could probably refinance it on a DSCR loan (assuming you will not reside there and use as an investment property). The rate should be lower if you have a good FICO. Otherwise, other non-qm loans are available that will look at your income. I'm not sure if the rate will be much better though! If you want me to peek at DSCR pricing, let's connect.

Happy Friday!

[Melvin List]

Non Warrantable Condo's can be tricky in Florida.  Most of my clients either put 30% down or have 30% equity for a refinance.  There are a couple of lenders out there that you can still go conforming without having to fill out a all of the Fannie Mae Condo Questions that make the property non Warrantable.