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Dear PoPville – Refinancing a home with a legal basement unit?

by Prince Of Petworth July 25, 2014 at 2:30 pm 27 Comments

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Photo by PoPville flickr user clif_burns

“Dear PoPville,

We bought a home two years ago in Bloomingdale with very little down payment and, given the rise in prices in the area, we are thinking on refinancing to get better terms in the loan. We are quite confident that we have more than 20% equity in the house considering numerous recent comparables.

Our surprise is that some lenders are offering more stringent terms because the house has a separate legal basement unit. When we bought the house two years ago it already had a Certificate of Occupancy and it was already classified with a use code 24 (Residential-Conversions less than 5 units). However, no lender raised the question of the second unit, and we closed without any problems or amended terms.

We would be interested in knowing how people are financing the houses that have legal rental units with C of O nowadays. If the terms are indeed more stringent for houses with C of O, that would be yet another reason not to go through the painful process of “legalizing” an english basement.”

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