Expert: liznarr - 10/30/2006

Question
I own a home in Texas with an appraised value of at least $550k (possibly $600k).  This is an investment property, but not yet labeled as such by my CPA.  I need to get a substantial amount out of this house...in the neighborhood of $175k.  The mortgage balance is $390k.  In Texas, I can not get out greater than 80% of my eauity LTV.  At $600k, seems like the most I could get out at 80% would be approx $90k ($480k - $390k).  That would be on a refi of course.  However, I have heard that with investment property in Texas, you may be able to find a lender who can offer up to 95% LTV...provided your credit/income are outstanding (my credit and income are superb).  Also, I would like to know if I can sell the home to myself?  Or perhaps to myself in the form of a trust/business?  That would be to maximize cash-out and it would fall within the rule of it being my primary residence for 2 of the last 5 years so the taxation would not occur.

Answer
Hi David,

I am not familiar with laws in Texas, so I do not know if on investment property you could get a 95% LTV loan.  It’s worth a try to make a call to a lender and find out.

One of my clients refinanced a second home (water front) that was purchased and then refinanced to fund extensive renovations, and was able to get 90% LTV.

Superb credit and income are always the greatest advantage a person has in bargaining for a loan that most people will not qualify for.  If you are that strong on both income and credit, I would think you might be able to negotiate … something.

You, of course, could sell your home to yourself.  However, whether or not this type sale would qualify under any IRS rules for whatever you might need to qualify for would be another question you should ask an accountant.

I also had a Buyer very recently who wanted to purchase a property and put it in the name of a Trust, but the lender would not fund a loan to be obtained in the name of a trust, since the trust did not have income.  If a property were unencumbered by a mortgage, that would be a different story, or possibly if a Trust had enough recurring income to justify a loan.

Prior to your obtaining any loan, if name on your title will be changing, be sure you check with your accountant or CPA about the primary residence rules as a precaution to make sure what you “think” you are accomplishing is what you actually “will” accomplish.

Out of curiosity due to your question, I will be checking with Dana, a lender friend of mine, about the 95% refinance in Texas.  She is with a national bank that I’m sure would probably be in Texas, and she may be able to help you with some of your questions.  If you want to email me at liznarr@sc.rr.com with your email address and the questions for her, I will forward yours to her and ask that she respond directly to you.

I hope the above is helpful and points you in the right direction.  Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth