Refinance in 6 months using value rather than purchase price

6 Replies

Anyone know of anyone that does refinances of properties that are owned for 6 months that would base the LTV% on the actual value rather than the purchase price? I find it odd that it's been so difficult to find. Hypothetically, if I purchase a 5-10 unit complex for $20,000 that is worth $100,000 so 20%LTV and need to refinance to pull more cash out, or refi for any reason in 6 months I'm trying to understand why I couldn't. Every company I've spoken to would only provide a refi for 65-80% of the purchase price even though the property is actually worth a lot more than that. Anyone know of a company that would provide a refi on the value and not the purchase price when needing a refi in 6 months?

It's difficult to find because using the purchase price for the basis of the loan in the first 12 months helps to limit the exposure of the lender. If they allowed for the appraised value it usually means that the lender holds more/all of the risk since the borrowers equity is stripped out either in part or completely which leaves the borrower them with little or no risk or 'skin in the game'.

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@Sherri Duncanson Is this a conventional loan or commercial loan(if 5 to 10 units I am guessing commercial)? With commercial loans it typically depends on the lender you are using as they have a lot of flexibility to work with you. The better performing the asset the more likely you can work outside of the normal bounds set. I have two local banks in my town who are the primary commercial lenders and one is more aggressive then the other bank. With that said, I would urge you to understand the capacity to lend for each bank. You need to find a bank large enough to have plenty of capital to work with but one small enough that they will evaluate their loans based on your ability to manage the property and the assets unique characteristics.