Quote from @Mario Morales:
If you own a 2-flat with an additional non-conforming garden unit (basement) being rented, and you're considering a cash-out refinance, how will the lender evaluate the rental income? Specifically:
- Will the lender only consider the rental income from the two legally zoned units, even though all three rental incomes are declared on your tax return?
- Will they base their calculations solely on the income from the two legal units and disregard the non-conforming basement?
Additionally:
- What is the current loan-to-value (LTV) ratio for rental properties?
- If the property were owner-occupied, would I only receive credit for one rental unit's income, while the non-conforming basement income wouldn't count?
From my understanding, it might be more advantageous to refinance as a rental property at a lower LTV with income from two units, rather than as owner-occupied at a higher LTV with only one rental income considered. Does this make sense?
Hey Mario, I need a few questions answered before answering some your questions. Here are some answers though. Feel free to add me as a connection and follow up through message.
1. The collateral makes a difference.
2. When we order the appraisal everything will come up so it will need to be listed correctly or else the 1007 will come in low.
3. Appraiser will check the rent schedule and if there were any improvements done.
4. When you converted the 3rd unit and put it on your tax return was it done through the city?
5. If is 65% and below LTV you won't need to provide reserves.
