DDo I tell Bank about HML on property I want to Refi with???

[Ade Adesuyi]

I’m hoping someone can give me a clear answer on this. I have a SFR that I’m starting a cash out refi on. I bought and fixed the property with a HML 9 months ago. After submitting documents to my loan officer, he emails me back wondering why I declared mortgage interest on my tax returns for this property. They must be wondering how this property has mortgage interest if it’s supposed to be “free & clear”. My question is, is it pretty standard for banks to know that these properties are bought with a HML since we’re presenting them under the guise of a “free & clear” status? Do I divulge that I bought it with Hard money or is that a terrible idea? Not quite sure what to do or how to proceed.

[Victor N.]

Didn't you grant a mortgage to the HML to secure repayment of that loan? If yes, your property is not "free and clear." The title work will show the mortgage lien which will have to be paid as part of the refinancing in order to give the new lender a first position mortgage lien securing the new loan. Time to come clean to your loan officer.