Refinancing in BRRR all CASH

6 Replies

Hi everyone, first post. I've been lurking the BP community for a while and it's been exciting to learn from everyone. Thank you! 

This question has been asked multiple times in the forums and covered in some articles but I am still pretty confused. When REFINANCING a BRRR property bought with cash, is a seasoning period required? To my understanding, if all cash, then no seasoning is required. But, i've also read that regardless of initial investment (cash, conventional, HML/PML), a 6 to 1 year seasoning is required depending on the lender I am refinancing with.

I guess what I dont understand is, if bought with my own cash initially, why the seasoning? 


Hope it makes sense, and thanks in advance!

No seasoning is required. There are cash out pricing adds at every place you go. Just Friday FHFA added a .5% point add to pay for what they expect to be Fannie and Freddie's struggles coming out of Covid-forbearances. 

@Jc Galang it may depend on the lender, but if you are refinancing before six months, you're limited to taking out only acquisition costs (purchase price and closing costs), whereas if you wait the six months, you are not limited to acquisition costs.

@Erica Larence I see. So even if the original purchase was with cash, certain lenders would only let me take out acquisition cost, but not rehab. So it wouldnt be based on ARV and LTV?

Do you find that this is the norm with all cash purchases nowadays? Thank you for replying!

Originally posted by @Caroline Gerardo :

No seasoning is required. There are cash out pricing adds at every place you go. Just Friday FHFA added a .5% point add to pay for what they expect to be Fannie and Freddie's struggles coming out of Covid-forbearances. 

Gotcha. Pricing adds refer to closing costs? Yes, I read about the added 0.5 point add. Do you think some lenders would have to eat that cost or will it usually be passed on to the buyer?

What do you think will happen with refinances? Up? Down? stay the same since rates are still historically low? Thank you for responding!

 

Lenders will pass on the .5 cost to borrowers in the form of interest rate or points. Rates are going to stay low. The cost to do a cash out refinance is going to increase as the financial markets seek stability. You can get credit for amount paid plus remodel costs if the appraisal has comparables in past three months. Get your FICO perfected, show net income on your IRS taxes to do a qualifying loan. Other loan products are available without the taxes but rates jump to next risk level

Originally posted by @Erica Larence :

@Jc Galang it may depend on the lender, but if you are refinancing before six months, you're limited to taking out only acquisition costs (purchase price and closing costs), whereas if you wait the six months, you are not limited to acquisition costs.

Does the type of financing matter? If you use HML, can you refinance before six months?

And similar to what the OP asked, you can only refinance and get up to purchase price and closing costs? However, ARV and LTV would not be included until after 6 month period?