The answer for rentals
CapCenter's fixed-rate home equity loan is available only on single-family primary residences and second homes. Investment properties, including single-family rentals, aren't eligible for it.
If you were hoping to borrow against a rental, we understand that's disappointing. A loan consultant can help you look at other routes.
Why lenders see rentals as riskier
When money gets tight, people tend to protect the home they live in first. Rental income can also stop if a unit sits empty. For those reasons, lenders usually set stricter rules for investment properties, and second mortgages on rentals are harder to find.
Rentals also carry costs a lender has to account for, like vacancies, repairs and property management, which can make the borrower's budget tighter than it looks.
Option 1: cash-out refinance on the rental
A cash-out refinance replaces the rental's current mortgage with a larger one and pays you the difference. CapCenter finances investment properties on first mortgages, so this may be possible, depending on the property and program.
Expect tighter limits and higher pricing than on a primary home. Investment properties and cash-out refinances can each add pricing adjustments or an upfront fee. Weigh that against giving up your current rate on the rental.
Option 2: borrow against your own home
If you own a single-family primary residence, a CapCenter home equity loan on that home may be an option, even if the money goes toward a rental, like repairs or a down payment on another property. Loan amounts run from $50,000 to $250,000, with 15, 20 or 30-year terms, and ZERO Closing Costs (restrictions apply).
Keep in mind that this puts your own home on the line for an investment goal. Make sure the rental's numbers work even if it sits empty for a while.
What lenders look at
- Your credit score, reserves and debt-to-income ratio
- Rental income, often shown on your tax returns or a lease
- The property's value, condition and type
- How many financed properties you already own
Taxes
How interest is treated for tax purposes can depend on which property secures the loan and how you use the money. Rental and home equity rules differ. Talk with a tax professional before you borrow.
