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Want to buy a new home and rent out your old house? You could face a glitch.
It might be hard to refinance a house that you’re renting out, because “things change when you’re no longer dealing with a primary residence,” warns Ben Chenault Jr., regional manager at MortgageBanc/Fairway Independent Mortgage in Birmingham, Alabama.
“A lot of people want to jump on the great deals, but they still have their current home and don’t want to wait for that home to sell,” Chenault says. “They think, ‘Aha! The rental market is good; I’ll just rent it out.’ But what if someone stops paying the rent? Are you sunk? If the answer is ‘yes,’ you probably shouldn’t do it.”
Let’s suppose, for the sake of discussion, that you’ve already done it. Now you own two houses — one that you occupy, and one that you don’t. To cut monthly interest expense, you want to refinance the house you’re renting out. It might not be easy. Here are some tips.