All Forum Posts by: Joe Massey

I definitely agree with @Chris Lopez on this one. You could refinance and take cash out of this property up to 75% LTV, then use that cash to buy 1 or 2 additional investment properties. Keep this one as a cash-flowing rental and use the equity to buy more properties that will cash flow and also appreciate. Using a solid refinance and good purchase money mortgage, you can expand from 1 property to 3 very easily and then have 3 properties making you money with 0 cash out of your pocket.

Hi Mindy - 

I work for a FNMA direct lender and I can tell you that every conventional loan Promissory Note includes a due on sale clause.  This clause stipulates that if the property is transferred from the original owners/borrowers, then the lender reserves the right to call the loan due and potentially foreclose on the property if you aren't able to pay off the loan.  

It's important to understand that if you violate this term of the Note, you are knowingly going outside the terms of the agreement between you and the lender; thus the lender is well within their rights to require immediate repayment.  Obviously some lenders will call the loan due and some (many?) lenders will not call the loan due immediately.  

I'm 100% certain that you can find all kinds of people that tell you "it's ok," "everyone does it," "I've never had a problem with it," etc.  But you want to go back to the old quip from years ago "if everyone jumped off a bridge, would you do it too?"  There are pros/cons to every deal structure, but I'd encourage you to read your Note and Deed of Trust very carefully and make sure you understand what you are doing if you start violating the terms that you're agreeing to.  

Understanding that this is not a grey area and it is clearly spelled out in your agreement with the lender is an important part of determining your risk/reward with transferring properties.  Obviously seek out legal/tax/insurance counsel in order to determine the best route for your individual circumstances.  

I hope that helps and let me know if there are other specific questions that I can answer.