Cash out refinancing after 6 months on a financed home

7 Replies

Hi everyone;

I recently bought a 2 family investment home with 25% down payment. 

I am planning to buy 2 more properties in 2015. 

Will I be able to refinance this home, in 6 months for a cash out? 

Thanks

After six months you can refinance. You will only be able to go up to 75% LTV since I am assuming that the bank you worked with required you to put down the 25% to purchase.

@Josh Mitchell  Thanks for your response.

Just to make sure I am clear on what you mean. So if I can only go up to 25% LTV and put 25% down (and yes it was required by my lender) then there wouldn't be anything to cash out since I will not have paid out more than 25% in months.

Would that be accurate? 

When you do a cash out refinance, or any refi, the lender will require an appraisal done to accurately assess current market value. If after you purchased the home 6 months ago, you either put sweat equity into it (rehab), or your property has appreciated. Now we are only talking 6 months, but maybe in your luck new sales in the area have offered higher comps to help your homes appraisal! 

The 75% LTV will be based on the new appraisal value, not the price you purchased the property as.

@Ozzie Konar 

correct. Since you were required to put down 25% you started your loan at 75% LTV. Most banks will not allow you to go over that mark when doing a cash out refi, although there are some that allow you to go to 80% LTV. So unless you have been making major payments to the property, or done major rehab to it, you probably don't have enough equity to do a cash out refi that makes it worth doing after you add in fees.

Hello Ozzie,

On a 2 unit investment for cash out you're looking at 70% LTV.Hopefully you did some work on this home and those upgrades can help the value.

As long as your income, assets and job history are good and your DTI (debt to income ratio) is around 46 or 47 or less you should be fine.

Get with a loan officer who is familiar with investments loans and move forward from there.

Also make sure your cpa does your taxes this year to help you qualify not hurt you.Unless of course your 9 - 5 makes enough to cover everything.

A lot of moving parts to these types of transactions so just be on top of everything and use your team ( cpa, loan officer etc. ) make you better.

I hope this helps and take care.

Well. But keep in mind. You paid 25% of the purchase price. That had nothing to do with the value of the property at the time.

So your cash out refi is based on the appraisal value and not the purchase price.

The assumption is that if you bought an investment property, I would hope that you got it a discount of at least 20 to 25%. Hopefully 30% or more. But at least 20 to 25%.

So lets say you bought this 2 flat for 200k and put down 50k which would give you a loan of 150k. But that the 2 flat would actually appraise out at 250k which means you got it for 80% of the ARV.

When you go to refi it, if it appraises out 250k, you would be entitled to a loan amount of 75% of that number or 187k.  That would allow you to get back 37k of your 50k after you paid off the existing 150k loan.

Ideally, you would have bought that 250k property for 175k (70%) and would be able to get all your money back.
Purchase: 175k
25% DownPayment: 44k
Existing Loan: 131k
New Loan at 75% of 250k: 187k
Amount paid to you after refi: 56k....

In, this example, you would get back more than your initial down payment.....

The key is whether you bought the investment property at a sizable enough discount or not.

Can you recommend banks that will do the cash out refi loans described? Thanks

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