Cash Out Refinance - Local Bank or Institution ?

Question

BP,

With regards to multi-family (2 - 4 units)

My experience has been that local banks are not offering cash out refinance on the residential side due to COVID-19.  For the duplexes and quadplexes that my business partner and I own we are only being quoted from their commercial lending side.  I've been quoted 5YR ARM amortized over 20 in the 4.25% region & 5YR ARM amortized over 15 in the 4.75% neighborhood.

I have never cash out refinanced.  Do national lending institutions offer (better term) fixed rate cash outs?  Will national lending institutions cash out refi 2 - 4 unit multi families as residential in the COVID-19 world we live in?

Thanks !

Caleb

John Caleb Pavlus · Answer

@Alex Bekeza,  I'm picking up what your putting down.  Again, very helpful.  I have your website saved in my browser favorites.  Thank you for taking the time to respond.

Caleb

Peter Morgan · Answer

@Parker Stone

Hello Parker,

You brought up a great point I have been researching for the  last few days, thought you could help me with some of your insights as

I am confused if I should go for a straight forward refinance or owner occupied line of credit (debt structured as a first lien position as opposed to an adjunct to a conventional 30 yr mortgage). Iam currently on a 30 yr conv mortgage at 3.5 with 25% principal paid out on my multi-family property.

I think refinancing will get me a 2.5% for 30 yr

but wondering if should go with a line of credit

instead? I highly appreciate any inputs here.

Alex Bekeza · Answer

@John Caleb Pavlus Thanks!  Well Pre Covid you could find these in the low to mid 5s at par.  As of today (early August) In this new environment with increased risk from the lender's stand point (Covid, unemployment, bans on evictions, general  uncertainty, etc) the most aggressive I'm seeing from the biggest nationwide providers are in the 6s although buy downs into the 5s may be available with some groups.

These types of loans aren't backed by Fannie/Freddie or any GSE and therefore rely on secondary market investors such as big hedge funds who balance risk vs. reward.  That being said, these completely disappeared in March/April alongside stay at home orders and started to creep back in early June.  At first terms were completely prohibitive across the board but they're starting to come back down to a point where they can be doable.

It will never be an apples to apples comparison to a conventional loan but it will often times be the best alternative if you've reached your conventional limits whether that be because of # of properties, DTI, entity structure, or a myriad of other reasons.

Alex Bekeza · Answer

@John Caleb Pavlus.  Nationwide commercial lenders are still actively funding cash out refinances although the highest I'm seeing today for anything decent is 70% LTV.  Rates will be higher than conventional/local banks but 30 year fixed terms are available. 2-4 units resi is no problem for these programs.  LLC vesting is fine, no limit on # of financed properties, all dscr based, etc etc.

Parker Stone · Answer

@John Caleb Pavlus, depending on your goals and objectives, you might also considered a non-owner occupied equity line of credit. From what I recall, Penfed (link below) had a higher LTV and more flexible terms than most lenders.

https://www.penfed.org/home-equity-center/10-20-home-equity-line-of-credit

Parker Stone · Answer

Hi @Peter Morgan, it's tough to say what would be best for your situation. I would recommend reaching out to mortgage brokers and/or lenders that operate in your market. I feel they would be in a much better position to walk you through your options in that specific region.

John Caleb Pavlus · Answer

@Alex Bekeza, appreciate the response - very helpful.  Nice Website by the way.  When you say that 30 year fixed terms are available but will be higher than conventional / local banks - theoretically... someone with a FICO of 740+ wanting to cash out less than $300K could expect what interest rate?

@Parker Stone, that is really helpful.  Thank you for the link.

Caleb

Cash Out Refinance - Local Bank or Institution ?

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