Question: I would like to refinance a mortgage on a single family home >that we are presently renting out. However, I am told that to >finance a home that is being rented out, lending companies >require 30% owner equity (we have about 15%). Is this rule >etched on stone, or are there lower-owner-equity alternatives >that I haven’t found out about yet?.

Answer: The lenders to whom I have spoken seem to be pretty well set on the 30% equity requirement. I have seen people get around this by moving into their rental property and refinancing it while they live in it. They continue to live there for the required period of time after refinancing (6 months or a year, I forget which). After that time they move out.

This approach isn’t for everybody because it usually requires one of the following:

1. Sale of your primary residence. 2. Conversion of your primary residence to a rental. 3. Making two mortgage payments simultaneously without the benefit of the rental income.

If you happen to be in the situation where you are building a new home and need to reduce the payments on your rental, this approach may work out well, otherwise it looks like a lot of inconvenience.

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