Refinancing out of a hard money loan

Real Estate Agent · Dallas-Fort Worth, TX · Member since 2021 · 116 posts · 69 votes

Hey just wanted to know who ya'll are currently using when refinancing out of a hard money loan? I've noticed that some lenders are no longer refinancing on the after repaired value if the house has been owned less than 5 years. Are you seeing that? Also, what are your thoughts on 20 vs 30 year terms when the plan is to buy more? Any thoughts or input is appreciated!

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Jared RineBusiness Member

Lender · Sacramento, CA · Member since 2009 · 1k+ posts · 277 votes

@Marc Stevenson..ME (full disclosure, I'm a mortgage broker). Any type of DSCR lender should be giving full value after 6 months of ownership...5 years is wild if that's a guideline with lenders you know of. 20 is going to pay off sooner obviously but I have clients many clients taking 40 Year Interest-Only $$ (10 Years I/O, 30 year fixed). Prepay ends in 5 years or less. Cash flow to the maximum.

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Chris Tarpey
Investor · Jacksonville, NC · Member since 2018 · 193 posts · 107 votes
4y
HMMM... We use Lima One Capital and are able to get 20-30 year terms on the ARV even after owning the home for less than 5 years.
We typically stick with the 30 year rental loans, but I know others choose 20 years! I believer both provide good options depending on what your looking to do with your portfolio! I think after we grow and acquire more, getting to a point we are comfortable with, we may switch to a 20 year option.
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Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
4y
@Marc Stevenson- let me know if you would like a referal to a collegue that should be able to assist 2) 30 yr and 20 yr fixed are normally same price ( or close to the same ) so use 30 yr fixed in order to make payment smaller ( you can pay more per month if you want to payoff the loan quicker )
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
4y
Quote from @Marc Stevenson:

Hey just wanted to know who ya'll are currently using when refinancing out of a hard money loan? I've noticed that some lenders are no longer refinancing on the after repaired value if the house has been owned less than 5 years. Are you seeing that? Also, what are your thoughts on 20 vs 30 year terms when the plan is to buy more? Any thoughts or input is appreciated!

If this is a rental property, you might be able to do a DSCR loan. There are lenders that have 30 year fixed rates in the 6s and 7s. You might also be able to pull some cash out if you have enough equity.
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Jared RineBusiness Member
Lender · Sacramento, CA · Member since 2009 · 1k+ posts · 277 votes
4y
@Marc Stevenson..ME (full disclosure, I'm a mortgage broker). Any type of DSCR lender should be giving full value after 6 months of ownership...5 years is wild if that's a guideline with lenders you know of. 20 is going to pay off sooner obviously but I have clients many clients taking 40 Year Interest-Only $$ (10 Years I/O, 30 year fixed). Prepay ends in 5 years or less. Cash flow to the maximum.
Jared Rine United Lending Partners53 Reviews
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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
4y
Quote from @Marc Stevenson:

Hey just wanted to know who ya'll are currently using when refinancing out of a hard money loan? I've noticed that some lenders are no longer refinancing on the after repaired value if the house has been owned less than 5 years. Are you seeing that? Also, what are your thoughts on 20 vs 30 year terms when the plan is to buy more? Any thoughts or input is appreciated!

@Marc Stevenson
Not sure who you're using for your refinances, but there are no institutional lenders that require the borrower to be on title for more than 1 year. Fannie/Freddie guidelines only require 6 months for cash out. You should ask the question again because they must not have understood the question.
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Ty CouttsBusiness Member
Lender · Denver, CO · Member since 2022 · 467 posts · 230 votes
4y
Quote from @Jared Rine:

@Marc Stevenson..ME (full disclosure, I'm a mortgage broker). Any type of DSCR lender should be giving full value after 6 months of ownership...5 years is wild if that's a guideline with lenders you know of. 20 is going to pay off sooner obviously but I have clients many clients taking 40 Year Interest-Only $$ (10 Years I/O, 30 year fixed). Prepay ends in 5 years or less. Cash flow to the maximum.

I agree with @Jared Rine. I know a ton of investors that are using a 40yr with the first ten as interest only to maximize cash flow and then most likely refinance again before the 10 years are up whenever the rates are more beneficial.
Also as many people have said you should never have to wait longer than 6 months. I’m licensed in Texas and always can provide quotes if it helps to put real numbers on your example.

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
4y
Definitely go with the 30-year term if you are planning to buy more / scale with any sort of speed
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Eric GoldmanBusiness Member
Lender · PA · Member since 2019 · 357 posts · 190 votes
4y
30 years fixed. 6 month seasoning is the baseline
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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
4y
Quote from @Marc Stevenson:

Hey just wanted to know who ya'll are currently using when refinancing out of a hard money loan? I've noticed that some lenders are no longer refinancing on the after repaired value if the house has been owned less than 5 years. Are you seeing that? Also, what are your thoughts on 20 vs 30 year terms when the plan is to buy more? Any thoughts or input is appreciated!

@Marc Stevenson
5 years!!! That is nuts. but the answer depends on what you are trying to do. For example, are you trying to walk away with cash after refinancing? or, are you simply trying to refinance what you owe on the hard money loan? The answer will depend on those answers for most lenders. We can pull cash out right away with a strong appraisal using the improved value where most program requires at least 6 months seasoning to use the new value to pull out cash. But, most requirements allow you to use the new value right away if you are only trying to refinance what is owed and not walk away with cash.
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Marc Stevenson
OP
Real Estate Agent · Dallas-Fort Worth, TX · Member since 2021 · 116 posts · 69 votes
3y
Hi Jay! Yes, my thoughts exactly! That is nuts. Thanks for taking a few minutes to chat today. I appreciate the time.
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Marc Stevenson
OP
Real Estate Agent · Dallas-Fort Worth, TX · Member since 2021 · 116 posts · 69 votes
3y
Quote from @Dave Skow:

@Marc Stevenson- let me know if you would like a referal to a collegue that should be able to assist 2) 30 yr and 20 yr fixed are normally same price ( or close to the same ) so use 30 yr fixed in order to make payment smaller ( you can pay more per month if you want to payoff the loan quicker )

Looking for a good lender. Any referral you have would be much appreciated!
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Marc Stevenson
OP
Real Estate Agent · Dallas-Fort Worth, TX · Member since 2021 · 116 posts · 69 votes
3y
Quote from @Eric Goldman:

30 years fixed. 6 month seasoning is the baseline

@Eric Goldman Thanks for the input!
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Eric GoldmanBusiness Member
Lender · PA · Member since 2019 · 357 posts · 190 votes
3y
Quote from @Marc Stevenson:

Quote from @Eric Goldman:

30 years fixed. 6 month seasoning is the baseline

@Eric Goldman Thanks for the input!

I do have some local banks that have crazy guidelines, i use for one off deals. typically better rates.. but they want your inked foot print from birth.
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