Refi Duplex after 1 Year

[Steve K.]

I purchased a foreclosed Duplex more than a year ago for 120K. I occupy one portion as a Primary residence (55%), and other is rented out (45%). During purchase, I approached a handful of lenders for financing but eventually, none of them made it to closing. I still went ahead (100% Cash) with the sale by using alternative funding such as Personal loans, etc.

Fast forward 1 year, the market is up. Comps in the area are about 180K for a duplex little smaller than ours. I'm planning to refinance to pay off higher interest debt for now and use rest of the money later for investing. The property is in PA.

Over the past weekend, I sat with a loan officer from my primary bank (a big bank). I was going for a HELOC loan with the current rate of mid 4's, and all looked ok until they heard that the property is a duplex. Then, they asked me if I was ok to pay for appraisal about $400 (which would have been paid by the bank if this was 1 unit and owner-occupied). Then I asked if the interest rate of mid 4's would be still good? They weren't sure. I was told that I may have to get an investment loan. I had to end it there until I receive clear information

I'm in PA

Don't most bank consider 4 or less unit as residential?

I understand that if not used as the primary residence, it may fall into the investment loan category. Do folks at the bank know what they are saying?

Have to experience this situation before, how did you handle it?

I'm shopping for HELOCs now with high LTV and Low APR's, any suggestions?

Thanks a lot for the help!

[Matt Crusinberry]

@Steve K., I think you're on the right track. Banks do know that you have a residential property, and that you will be refinancing it into an investment property. You'll still be dealing with a residential lender, but I would recommend you contact a smaller and local bank to work with, as they tend to be a little easier. It will pay in dividends down the road as you begin to grow your business as well (having that relationship). Also, they'll give you the option to keep the loan in house as a portfolio loan. I hope this helps and good luck!