I am looking into buying a 7-family home in NY. I can't get a regular mortgage because it's over 4-units, non-owner occupied. So I am faced with a commercial loan. I also own a 4-family home with no liens. I purchased the 4-family in August at $130k and now it's fully rented with income of $43,000 / year. Appreciation has been great and houses have been fetching good money now. I would estimate the value of the 4-family at around $200k.

I have a $180k mortgage on my primary residence which has been appraised at $300k.

I need to get a loan for $160k. I have about $30k to put down (house is $190k.) Is it better to take out a commercial loan or a home equity loan (on the 4-family) to buy the 7-family? Again, rents from the 4-family as well as the 7-family will help pay all mortgages and expenses.

If commercial is the best way to go, any suggestions where to go for the best fixed rate? I want fixed rate because I like to know what my mortgage will be today and 10-years down the road.

Regarding your question about which one is better…..

Which one of the two alternatives is the cheapest?

After you answer that question, you might want to check on whether that “house” is conforming to zoning. The term house is not used for multi-unit improvements.

You might also want to find out if the original 4-unit qualifies for a home equity since it seems as if it is fully rented and not owner occupied.

Good luck

The four unit, even non-owner occupied, would still qualify for residential financing....which would be cheaper and easier to obtain than commercial financing. Small Commercial Line Amounts can be expensive, and limited in options. Just to compare apples to apples, look at the appraisal cost and completion time alone.....commercial appraisals can take up to 4 weeks, and cost thousands (The 7 unit would probably run around $1500, and take around 2-3 weeks, minimum)...while a residential appraisal on 4 units would be less than $500, and take less than a week.
Also, the fact that one property is owned (Refinances are always easier than purchases) and producing more than enough income to substantiate the debt...would save you the hassle of proving income, maintenance, etc. on a property you have not yet purchased.

There's an incredible difference in the rate, as well as points and fees, when comparing residential to commercial.

If you'd like to discuss your options more thoroughly, please feel free to give me a call. I can be reached any time of day on the cell phone number listed in my signature.

If you do a HELOC, go with it. Less than $<200K is small commercial and you will probably end up with an adjustable. I am assuming you are buying a 7 family in upsate NY if you only need $130K. Fixed rate do not really shine in the comemrcial relam. Also the major brick and mortar banks that promise you a fixed rate for 5-10 years will not usually venture outside on metro areas. It would be better to buy it cash and then refi if you need to later. Hope that helped!