Commercial vs. Residential

[maddy]

What is the name of your state? Massachusetts

Hi, this is my first post.

My husband and I recently bought a 5-unit apartment building in downtown Boston. Since it's a 5-unit (more than 4 units), it was mortgaged as a commercial property.

We currently live in one of the units, others rented out. Once the leases for top two floors end, we plan to convert them into a duplex and we will live in it.

Then, we could refinance the property as a regular residential property in order to get a better interest rate and everything will be more flexible in the long run. For instance, applying for a home equity line of credit is so much easier as a residential property. There are tons of no-cost refinancing programs for residential. But there is none for commercial. Also, selling it will be easier and faster as applying for a residential mortgage is so much easier. Most importantly, the interest rate will definitely be lower, at least 100 basis points lower assuming all other terms stay the same.

The downside is probably the cost of closing a new residential mortgage. But the upside is just endless.

I'm wondering if our approach is correct and if anything we need to watch out for.

Any information will be greatly appreciated.

Thanks,

Maddy

 

[Bigfoot]

Two questions: what is the zoning of your property, and how will you be taxed?

 

[FarmerJ]

also ask your housing inspectins dept what is required to decertify from 5 to 2 . wich is what you will be doing when you reduce the number of units . Some citys are more than happy to see lower density units made by reconfiguring smaller units . so talk to inspections and zoning .

 

[HomeGuru]

After the renovation, the lender's appraiser must consider the property as 4 units.