How to: Refinancing From Conventional to 30 year note

[Mike L.]

Hi,

I haven’t gotten very clear direction from anyone (I’ve talked to a local bank and a mortgage broker).

I own a Sf house with three other partners in an LLC. We originally bought the house 2 years ago. Because we didn't have much credibility, we got a 20 year schedule with a 5 year term and around a 6% rate. We obviously need to refinance, but I want to do it the smartest possible way.

I'm told you can get a Fannie or Freddie loan if you are an LLC. I'm told we could switch the deed to one of the members of the LLC, qualify for a 30 year note, close on the refi, then immediately sign the deed back into the LLC. Is this really the way to do it? The mortgage broker said it could "trigger" a pay on sale clause but it "shouldn't " happen. Didn't seem very reassuring.

Related but separate: how do you get 30 year fixed notes on investment properties from the beginning? If I wanted to buy a 20 unit apartment complex?

Thank you,

Mike

[Nicholas Covington]

You have a few different topics here.

1. Fannie Mae is the one that allows you to move title into an LLC after closing. Keep in mind that you must close in your personal name as you are already aware. The only thing is the LLC normally has to be the majority own or a single owner. I do not believe Freddie Mac has anything in writing on allowing this as Fannie does.
2. The due on sales clause/acceleration clause would be based on you doing it without permission and getting "caught." Most people have not experienced this when taking the gamble, but it's still just that... a gamble.
3. 5 or more units is considered to be commercial and fannie and freddie normally are out the door UNLESS you are looking into their small balance loan. They offer 30 year fixed notes on 5+ units but we are talking loan amounts of normally 1mm or more for them to do it. They are not really for anything less than 1mm.

You are welcome to reach out if you have any other questions. If this was helpful give a vote :)