Mortgage  Question?
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Refinance condo building less than half owner occupied?

What are my mortgage lender options for refinancing a condo in a building that is less than 50% owner occupied? I am currently renting out the condo I want to refinance.

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

Although I think it will be challenging for you to refinance the mortgage on your condo at attractive terms, there are some financing options you can explore. The reasons it may be challenging for you to refinance are twofold. First, as you referenced in your question, most lenders require that condo buildings have 50% owner-occupied units, which is consistent with Fannie Mae and FHA guidelines. Although some lenders offer mortgages on condos in buildings with less than 50% owner-occupied units, these lenders typically charge a much higher interest rate and fees. For example, the interest rate charged by most lenders that are willing to refinance a condo in a building with less than 50% owner-occupied units is likely to be significantly higher than the 3.825% rate you are currently paying. We provide a comprehensive overview of How to Get a Mortgage on a Condo on FREEandCLEAR that addresses this topic in detail.

The second issue that you face in attempting to refinance is that because you do not live in your condo the mortgage is classified as non-owner occupied. Many lenders refinance non-owner occupied mortgages but there are some considerations you should be aware of for this type of loan. Lenders may apply more challenging borrower qualification requirements such as a lower maximum loan-to-value (LTV) ratio and higher borrower credit score or require you to hold a certain amount of savings in reserve at the time the mortgage closes. Additionally, the interest rate on a non-owner occupied mortgage is usually slightly higher than the rate on an owner-occupied loan. We provide a comprehensive overview of non-owner occupied mortgages and interest rates on FREEandCLEAR.

Although you face several challenges, you may have some refinance options. Our first recommendation is that you contact your homeowners association (or co-op board) to determine if anyone in the building has recently refinanced their mortgage or obtained a mortgage to buy a unit. A lender that recently provided a mortgage for a condo in the building may be more willing to refinance your mortgage at acceptable terms.

Another financing option you could explore is to contact large banks with both mortgage lending and private banking or brokerage operations. These banks may be willing to refinance your loan if you deposit significant funds into a brokerage account. In this case, the lender may apply more flexible mortgage qualification guidelines if you open a new account with a significant amount of money. These lenders, which are also called portfolio lenders, have the ability to keep your mortgage on their books instead of selling it, which enables them to offer loans that do not meet Fannie Mae or FHA guidelines (such as the requirement that at least 50% of units in a condo building are owner-occupied). Examples of portfolio lenders include First Republic, Boston Private, Citibank and Chase, among others.

We recommend that you contact multiple lenders to understand how they would handle your unique situation. You can review non-owner occupied lenders in your area by clicking INTEREST RATES We advise you to contact at least four lenders as lender underwriting guidelines can vary.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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