Rental Property Investor · TX · Member since 2014 · 51 posts · 13 votes
Hello everyone, I am looking for someone that can help me understand how the process would work if I paid cash for a property and then did a cash-out refi in Texas.
I am working on purchasing a property that is set to close on 7/31. I am purchasing the house for 90K but just got the appraisal that came back at 130K.
So my question is, if I buy the house in cash, how soon thereafter can I do a cash-out refi (is there a seasoning period)? Doing this will allow me to get my cash back instead of being tied up into the property and allowing me to purchase another property.
Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes
12y
There are several approaches, but you are wise to look into timing. What I have actually done recently in a similar situation is called a "delayed financing" process where you pay cash at purchase, fix up the property (if needed) and then finance for cash-out. You have 6 months from cash-closing to complete the delayed financing option and many (though not all) conventional lenders offer this product. You can normally get 70-80% LTV up to the original purchase price (plus closing costs). This is particularly interesting if you buy a fixer that would appraise low but will appraise significantly higher after repair. If your property already appraised at 130k you should have no problem getting the 90K back.
On the other hand, regular cash-out refi might be harder and DOES often have seasoning requirements. You might have to wait 12-18months for some of those unless you get a special deal form a smaller local bank for example. So really, perhaps the most difficult timeframe for cash-out refi is between 6 and 12 mo (even that is not impossible but may be with fewer choices)
Investor · Lodi, NJ · Member since 2013 · 487 posts · 179 votes
12y
Hey Maceo,
The seasoning period may depend upon the bank. I've cashed-out most of the entry money in that manner on buy and holds. My lender was local, with the underwriter being local as well. That seems to be key in getting it properly appraised. I had no seasoning period. 80 loan to value. As long as the bank values according to your 130k, you should be able to cash out completely even at 70 LTV.
So, try to find a local bank, tell them your situation, and see what their stance is.
Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes
12y
There are several approaches, but you are wise to look into timing. What I have actually done recently in a similar situation is called a "delayed financing" process where you pay cash at purchase, fix up the property (if needed) and then finance for cash-out. You have 6 months from cash-closing to complete the delayed financing option and many (though not all) conventional lenders offer this product. You can normally get 70-80% LTV up to the original purchase price (plus closing costs). This is particularly interesting if you buy a fixer that would appraise low but will appraise significantly higher after repair. If your property already appraised at 130k you should have no problem getting the 90K back.
On the other hand, regular cash-out refi might be harder and DOES often have seasoning requirements. You might have to wait 12-18months for some of those unless you get a special deal form a smaller local bank for example. So really, perhaps the most difficult timeframe for cash-out refi is between 6 and 12 mo (even that is not impossible but may be with fewer choices)
Lender · Chicago, IL · Member since 2015 · 608 posts · 70 votes
6y
@Justin Aguaze as of the moment a lot of lenders are changing how they do long term financing. Some are putting it on hold until this corona calms down. I may be able to help since I’m in the industry.
Rental Property Investor · Arlington, TX · Member since 2012 · 788 posts · 640 votes
6y
@Justin A. my lenders are currently on hold and other lenders are charging outrageous points and interest. I'd suggest waiting it out for a couple months.