Client got paid $41,000 to cash out their sub 4% mortgage, new program DREAM!

Chicago, Illinois
Buying & Selling Real Estate
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Client got paid $41,000 to cash out their sub 4% mortgage, new program DREAM!

Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

Kind of interesting, did not know this was even an option and wanted to share it on BP in case can help any other investors. The program goal is to prevent people from being locked in and to get housing supply moving, the program gives you 10s of thousands bonus to refi a lower rate mortgage. One of my clients last month did it and it actually worked, the loan closed and they received $41,000 extra off their principle while doing a standard conventional cash out refi. This was not some portfolio product, they had a standard conventional owner occupant mortgage previously and did the cash out refi into another conventional mortgage on a 3 unit property in Humboldt Park. Cool stuff for those trying to use cash out refis to scale, this is their 2nd property to do a cash out refi in the same neighborhood and we are currently working on their 3rd deal in the area. Love the north side of Humboldt Park rapid gentrification.

Here is the article on the program and my actual client is the one the article is written about.... https://www.businesswire.com/news/home/20260421090274/en/Gre...

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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
4mo

Interesting - GLCU was my bank when I was in the Navy & stationed in Great Lakes back almost 40 years ago. 

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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4mo

    I assume there’s a prepayment penalty or everyone should do this the month before they sell.  I wonder if that’s consider regular income and immediately taxable like a forgiven debt?

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  • Henry Lazerow
    OP
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    4mo

    Pre payment penalties I believe are illegal on conventional loans so doubt there is one.

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
    4mo

    Interesting - GLCU was my bank when I was in the Navy & stationed in Great Lakes back almost 40 years ago. 

    Podcast Guest on Show #243
    Skyline Properties
    View Page
    2Reply
  • Henry Lazerow
    OP
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    3mo

    Figured out a bit more of how this works and how it is profitable for the lender. The new lender works out a deal with the old lender to pay them a higher rate and keep the difference while letting the original borrower off the hook for the balance and giving them a new mortgage. It is common strategy with larger commercial mortgage, defeasance process allows a borrower to pay off or alter their loan before it ends. Instead of just paying cash, the borrower or in this case the new lender buys secure assets like higher yielding treasury bonds etc to replace the property as collateral. These bonds pay the lender exactly what they are owed over time.

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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 5k+ posts · 3k+ votes
    3mo

    Very interesting, thanks for sharing. A lot of owners are sitting tight with their cheap rates

    0Reply
  • Jacob CamhiBusiness Member
    Hinton, WV · Member since 2026 · 135 posts · 42 votes
    3mo

    that's an interesting strategy your client used. typically, when you get cash at a refinance, it's a cash-out refi, meaning you're pulling from the equity you've built in the property through appreciation or improvements. it's not usually a program that 'pays' you to refi, but rather a way to access your existing wealth in the home. to find properties with strong equity potential for this, i look at local county recorder data for areas showing consistent property value growth. that's how i spot opportunities to pull cash out and reinvest.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3mo

    We do something similar whereas we have given borrowers short payoffs and paid closing costs and rate buy downs as a note investor to get them to refinance a loan. 

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  • Christian Grosskopf
    Investor · Louisville, KY · Member since 2017 · 92 posts · 38 votes
    3mo

    Interesting—I hadn't heard of this program before. A $41k principal reduction just for refinancing is significant if someone qualifies. Definitely something I'll be looking into more. Thanks for sharing!

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    3mo

    A lot of info missing from the article.  They were paid $41k but what was their equity?  What was owed?    Was the term reset to 30 years?

    As bill pointed out, if this truly is a payout beyond equity position without prepayment penalty (PPP), every seller should leverage this option.

    Too much info missing, but mark me suspicious.

    Best wishes

    2Reply
  • Henry Lazerow
    OP
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    3mo

    @Dan H. everyone with a low rate mortgage or any form of low rate debt should be doing this before ever paying off that debt. It basically is a lender to lender deal that swaps a low rate mortgage with higher yielding bonds and then gives the old borrower some of the profit. Has nothing to do with a term reset, you get a fully new separate mortgage. Look up loan defeasance as it will help explain the process. This is not new on larger commercial deals, it’s just new to be done on such a small scale with residential mortgages. 

    Also I clarified with client was no pre payment penalties. Even if he closes new mortgage today it has no affect on the old mortgages already finished profitable swap for higher yielding bonds so the new lender does not lose. They do not care how long you keep the new mortgage. 

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    • Chris SeveneyBusiness Member
      Moderator
      Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
      3mo
      Quote from @Henry Lazerow:

      @Dan H. everyone with a low rate mortgage or any form of low rate debt should be doing this before ever paying off that debt. It basically is a lender to lender deal that swaps a low rate mortgage with higher yielding bonds and then gives the old borrower some of the profit. Has nothing to do with a term reset, you get a fully new separate mortgage. Look up loan defeasance as it will help explain the process. This is not new on larger commercial deals, it’s just new to be done on such a small scale with residential mortgages. 

      Also I clarified with client was no pre payment penalties. Even if he closes new mortgage today it has no affect on the old mortgages already finished profitable swap for higher yielding bonds so the new lender does not lose. They do not care how long you keep the new mortgage. 


       I tend to disagree, lets say my mortgage is $500,000 at 3% and has 20 years left, I am not going to swap that out for a 6% mortgage at $450,000. Also understand the closing costs etc. and title insurance and all that jazz.THis is just my opinion, but I am not giving up my interest rate for a principal reduction.

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