Posted on: 16th Feb, 2010 11:17 pm
My husband and I own rental property, and three of them have mortgages on them. At the closing, the bank had us sign a personal guarantee on the mortgages, even though we purchased them in a separate corporation, in which my husband and I are sole owners. (This corporation is actually legally a nominee corporation for our profit-sharing trust.) We didnt have a problem guaranteeing the loans, since the rental income more than enough covers the mortgage payments and expenses.
The problem is, that these loan balances show up on our personal credit reports, and of course, the rental income does not. Our scores look bad because of it. We could have taken out a commercial loan on these single-family homes, and probably wouldnt need to guarantee them, but the terms would have been more costly.
What do other investors do in this case?
The problem is, that these loan balances show up on our personal credit reports, and of course, the rental income does not. Our scores look bad because of it. We could have taken out a commercial loan on these single-family homes, and probably wouldnt need to guarantee them, but the terms would have been more costly.
What do other investors do in this case?
1. when you personally guarantee something it's because your own credit is on the line
2. income does not show up on a credit report
most investors generally wait before purchasing things w/out having ot personally guarantee anything. Since you are in this situation you will need to look at buying out he debt with commercial loan ....but you will need to have a good reason to do so. if you're planning to buy something right now iwth your personal credit then it may make sense...
if you're wanting your credit score to be prettier than that's not a good reason
2. income does not show up on a credit report
most investors generally wait before purchasing things w/out having ot personally guarantee anything. Since you are in this situation you will need to look at buying out he debt with commercial loan ....but you will need to have a good reason to do so. if you're planning to buy something right now iwth your personal credit then it may make sense...
if you're wanting your credit score to be prettier than that's not a good reason
actually, i'm surprised that you'd be surprised at the mortgages being reported on your credit report. by signing personally, you were guaranteed that it would be the case.
what i don't get is why they'd be hurting your credit scores. prompt payment of a mortgage - regardless of balance, etc. - ought to bump your scores. and banker is 100% right in stating that income will not appear on a credit report. it's not a part of the mix, simply.
what i don't get is why they'd be hurting your credit scores. prompt payment of a mortgage - regardless of balance, etc. - ought to bump your scores. and banker is 100% right in stating that income will not appear on a credit report. it's not a part of the mix, simply.
