Private money/ Hard money lenders/ Refinance options

Member since 2023 · 6 posts · 1 vote

Hello. I am new to the bigger pockets forums and discussions . My question is can you use a private lender or a hard money lender to refinance an investment property that is outright owned? Please let me know if you have any knowledge of doing this. Thank you.

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Ash Hegde

Lender · Fort Lauderdale, FL (Lending in FL CT GA MI PA) · Member since 2022 · 470 posts · 349 votes

Hi Taylor, for a long term cash out refinance, you are likely going to be looking at a DSCR loan. Hard money loans are generally used for short term acquisition and rehab.

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Aleksandr Simonelli
Member since 2023 · 12 posts · 1 vote
3y
Hi Taylor, welcome to Bigger Pockets!
Many if not all private and hard money lenders will give you the opportunity to do a refinance cash-out. This will put a lien on your home that is most often a 30 year term.
Otherwise some may offer you to go the HELOC (Home Equity Line of Credit) route, which is an open credit account, which usually carries terms between 5-30 years with 5-10 years being the most common.
Would love to connect and dive deeper into details.
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Ash Hegde
Lender · Fort Lauderdale, FL (Lending in FL CT GA MI PA) · Member since 2022 · 470 posts · 349 votes
3y
Hi Taylor, for a long term cash out refinance, you are likely going to be looking at a DSCR loan. Hard money loans are generally used for short term acquisition and rehab.
4 Reply
Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 669 votes
3y
Quote from @Mr.Taylor Sykes:

Hello. I am new to the bigger pockets forums and discussions . My question is can you use a private lender or a hard money lender to refinance an investment property that is outright owned? Please let me know if you have any knowledge of doing this. Thank you.

Hi Taylor, the only reason you would be seeking a hard money lender is if you were looking to make some renovations to the property. Renovation/bridge loans will allow you to borrow the necessary funds for rehab, and then roll into the base loan amount. I think you would best best suited for a DSCR loan where you can actually pull out as much equity as you'd like by just qualifying with the rental income the property currently generates. These are purely asset based loans, no, DTI, no income necessary.
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Scott WolfPro Member
Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 959 votes
3y
Quote from @Mr.Taylor Sykes:

Hello. I am new to the bigger pockets forums and discussions . My question is can you use a private lender or a hard money lender to refinance an investment property that is outright owned? Please let me know if you have any knowledge of doing this. Thank you.

Yes, a DSCR loan will let you do this. There are more options too, but definitely achievable.
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Mr.Taylor Sykes
OP
Member since 2023 · 6 posts · 1 vote
3y
Thank you so much Aleksandr. What are the requirements usually for a private and hard money lender to refinance your investment property?
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Aleksandr Simonelli
Member since 2023 · 12 posts · 1 vote
3y
As many have mentioned above, DSCR is an asset-based program that allows you to qualify based on the rental income of the property. This program wouldn't require any forms of income or employment verification and usually has quicker turnarounds than other programs. The MAX Loan To Value Ratio that most DSCR Lenders offer on a cash-out transaction is 75%.
One downside to DSCR is that it has slightly higher rates than programs, which check your income and have DTI (Debt to Income) requirements. These programs will calculate qualifying income based on the income type you provide, options include: Bank Statement, WVOE, 1099, P&L, Asset Utilization, and Full Doc (Tax Return and Paystubs). When providing income documentation, some lenders like us will increase the Maximum LTV to 80% for the cash-out transaction, while keeping the rate lower than DSCR.
It all depends on your financial situation and the documentation you chose to provide.
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Mr.Taylor Sykes
OP
Member since 2023 · 6 posts · 1 vote
3y
Thanks everyone! This helps a lot. I Appreciate the responses from everyone. :)
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Mike Klarman
Specialist · NJ · Member since 2022 · 1k+ posts · 655 votes
3y
So there are 3 major products that Hard Money?Private Money offers:
1) Bridge Loans - these are the "fix and flip" loans. Usually 12 month loan. Interest only payments. Rehab funds held in escrow for completed work. Cost: 2 - 3 points. You exit the loan by selling or getting a renter in the dwelling and refinance into 30 year product.
2) DSCR Purchase - this is used when buying a turnkey property that was maybe just rehabbed or renovated or in good shape. You buy right into a 30 year mortgage. You can get 75% - 80% leverage. Rates vary upon lender. Lowest par value rate I see right now is 7.7ish%. Your max payment will be Market Rent/1.1 and so your leverage may adjust according to your max loan payment allowed
3) DSCR Refi - This product is used when an investor has equity in the house and wants to pull some out. To do a refi on cash purchases there is a seasoning period usually of 6 months, but this product requires a renter usually with a lease and proof of rent being paid. Again, your loan payment is capped by the same formula: rent/1.1 = your max loan payment allowed. Some do negative DSCR but the rates are terrible. Good DSCRs are 1.3+. That means you collect 1300 in rent and your loan payment is 1,000. I've seen 1.7+ on some deals.
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