Delayed financing - all cash offer then refi immediately?
New to Real Estate · Los Angeles · Member since 2022 · 43 posts · 41 votes
Delayed financing - all cash offer then refi immediately?
Most Popular Reply
Dave MeyerPro Member
Head of Real Estate Investing at BiggerPockets · Seattle, WA · Member since 2015 · 224 posts · 826 votesTechnically this isn't a refinance, right? Refinance means you're replacing an existing mortgage -- that isn't the scenario you're describing. The right lender should understand this. I'm about to do this and the quote I've received are about the same in terms of interest rate.
30 Replies
- Lender · Chicago, IL · Member since 2021 · 424 posts · 145 votes2y
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
Are you wanting long term debt or short term debt on the refinance?
- New to Real Estate · Los Angeles · Member since 2022 · 43 posts · 41 votes2y
Quote from @Jason Taken:
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
Are you wanting long term debt or short term debt on the refinance?
Long term debt. Basically get that 30-year mortgage after closing
- 2yDave MeyerPro MemberHead of Real Estate Investing at BiggerPockets · Seattle, WA · Member since 2015 · 224 posts · 826 votes
Technically this isn't a refinance, right? Refinance means you're replacing an existing mortgage -- that isn't the scenario you're describing. The right lender should understand this. I'm about to do this and the quote I've received are about the same in terms of interest rate.
- New to Real Estate · Los Angeles · Member since 2022 · 43 posts · 41 votes2y
Quote from @Dave Meyer:
Technically this isn't a refinance, right? Refinance means you're replacing an existing mortgage -- that isn't the scenario you're describing. The right lender should understand this. I'm about to do this and the quote I've received are about the same in terms of interest rate.
Right, it's not technically a refinance. I had brought it up to my lender using the term "delayed financing" and he knows this would not be "refinancing" an existing loan, but he said this is basically a "cash out refinance." Is there another more correct term/process for this?
- 2yMelanie P.Pro MemberRental Property Investor · Member since 2023 · 1k+ posts · 922 votes
No, the term of art is "cash out refi" because it matches a box on a form they have to fill out. The rates are not that much higher maybe 1-2%. But if you can get the purchase money loan done prior to closing try to do so.
- New to Real Estate · Los Angeles · Member since 2022 · 43 posts · 41 votes2y
Quote from @Melanie P.:
No, the term of art is "cash out refi" because it matches a box on a form they have to fill out. The rates are not that much higher maybe 1-2%. But if you can get the purchase money loan done prior to closing try to do so.
Thanks for your insight. 1-2% is quite significant actually... Also what is the benefit of getting the purchase money loan done prior to closing?
- 2yMelanie P.Pro MemberRental Property Investor · Member since 2023 · 1k+ posts · 922 votes
Quote from @Catherine Ding:
Quote from @Melanie P.:
No, the term of art is "cash out refi" because it matches a box on a form they have to fill out. The rates are not that much higher maybe 1-2%. But if you can get the purchase money loan done prior to closing try to do so.
Thanks for your insight. 1-2% is quite significant actually... Also what is the benefit of getting the purchase money loan done prior to closing?
Lower rate, lower down payment. Whether or not this is true purchase money loans seem to close with less hassle - technically they're lower risk for the lender. One closing. One title insurance. One round of recordation taxes. MUCH better tax treatment. If you cash out refi you won't be able to deduct your mortgage interest until you deploy the loan proceeds on another rental - and you must keep them segregated until then. Purchase money you deduct all interest from day one.
- 2yAJ ExnerPro MemberLender · Springfield, MO · Member since 2023 · 652 posts · 314 votes
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
Hey Catherine,
We classify it as a 'Delayed Purchase' and set it at 80% of purchase price.
So if there is built in equity in the property, you would be missing out on it because of a presumed prepayment penalty, but its a great way to leverage the bargaining power of cash while still maintaining capital to buy multiples at a time.
Would be happy to help if you would like to take a look at what you would qualify for.
- 2yMatthew CrivelliBusiness MemberLender · MA · Member since 2021 · 1k+ posts · 1k+ votesIf you are doing delayed financing the loan would be based on LTC (loan to cost) and you would be getting purchase rates. This can be done within the first six months after the initial cash purchase. A cash out refinance is based on LTV, has seasoning requirements, and would be subject to higher rates.
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
I would shop around, maybe the LO you're dealing with is inexperienced and is mis communicating or they may just have odd lending practices?
Freedom Capital Funding, LLC523 Reviews - Banker · Henderson, NV · Member since 2023 · 316 posts · 74 votes2y
Hi Catherine,
Yes, you can refi after purchasing the property off of the purchase price.
There could be a slight rate adjustment to the pricing of the loan on the cash out refi as apposed to a purchase.
How is your credit history?
- New to Real Estate · Los Angeles · Member since 2022 · 43 posts · 41 votes2y
Quote from @AJ Exner:
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
Hey Catherine,
We classify it as a 'Delayed Purchase' and set it at 80% of purchase price.
So if there is built in equity in the property, you would be missing out on it because of a presumed prepayment penalty, but its a great way to leverage the bargaining power of cash while still maintaining capital to buy multiples at a time.
Would be happy to help if you would like to take a look at what you would qualify for.
Thank you for your insight. My biggest question is -- are the rates higher for "delayed purchase" or would it be the same as a regular purchase? I feel like I am getting differing answers about this from different lenders I ask. Thanks!
- 2yAJ ExnerPro MemberLender · Springfield, MO · Member since 2023 · 652 posts · 314 votes
Quote from @Catherine Ding:
Quote from @AJ Exner:
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
Hey Catherine,
We classify it as a 'Delayed Purchase' and set it at 80% of purchase price.
So if there is built in equity in the property, you would be missing out on it because of a presumed prepayment penalty, but its a great way to leverage the bargaining power of cash while still maintaining capital to buy multiples at a time.
Would be happy to help if you would like to take a look at what you would qualify for.
Thank you for your insight. My biggest question is -- are the rates higher for "delayed purchase" or would it be the same as a regular purchase? I feel like I am getting differing answers about this from different lenders I ask. Thanks!
It really shouldn't, if its a true 'delayed purchase' then from the lender's perspective it should be the same as a purchase. The issue is that you won't get to capitalize on existing equity (ie, getting a 'good deal on it') for being able to maintain some existing capital.
Just shot you a DM, would love to connect and talk through it to make sure I'm not missing anything.
- DFW Texas · Member since 2024 · 5 posts · 4 votes2y
Quote from @AJ Exner:
Quote from @Catherine Ding:
Quote from @AJ Exner:
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
Hey Catherine,
We classify it as a 'Delayed Purchase' and set it at 80% of purchase price.
So if there is built in equity in the property, you would be missing out on it because of a presumed prepayment penalty, but its a great way to leverage the bargaining power of cash while still maintaining capital to buy multiples at a time.
Would be happy to help if you would like to take a look at what you would qualify for.
Thank you for your insight. My biggest question is -- are the rates higher for "delayed purchase" or would it be the same as a regular purchase? I feel like I am getting differing answers about this from different lenders I ask. Thanks!
It really shouldn't, if its a true 'delayed purchase' then from the lender's perspective it should be the same as a purchase. The issue is that you won't get to capitalize on existing equity (ie, getting a 'good deal on it') for being able to maintain some existing capital.
Just shot you a DM, would love to connect and talk through it to make sure I'm not missing anything.
This is not correct. If you're doing a conventional loan, Fannie Mae and Freddie Mac guidelines say that delayed financing will follow "cash-out refinance" pricing matrix which inherently has slightly higher rates than a purchase. If you're doing a DSCR loan, the difference in rates will vary by lender but generally cash-out refinances will result in a slightly higher rate.
- 2yAJ ExnerPro MemberLender · Springfield, MO · Member since 2023 · 652 posts · 314 votes
Quote from @Devin Powers:
Quote from @AJ Exner:
Quote from @Catherine Ding:
Quote from @AJ Exner:
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
Hey Catherine,
We classify it as a 'Delayed Purchase' and set it at 80% of purchase price.
So if there is built in equity in the property, you would be missing out on it because of a presumed prepayment penalty, but its a great way to leverage the bargaining power of cash while still maintaining capital to buy multiples at a time.
Would be happy to help if you would like to take a look at what you would qualify for.
Thank you for your insight. My biggest question is -- are the rates higher for "delayed purchase" or would it be the same as a regular purchase? I feel like I am getting differing answers about this from different lenders I ask. Thanks!
It really shouldn't, if its a true 'delayed purchase' then from the lender's perspective it should be the same as a purchase. The issue is that you won't get to capitalize on existing equity (ie, getting a 'good deal on it') for being able to maintain some existing capital.
Just shot you a DM, would love to connect and talk through it to make sure I'm not missing anything.
This is not correct. If you're doing a conventional loan, Fannie Mae and Freddie Mac guidelines say that delayed financing will follow "cash-out refinance" pricing matrix which inherently has slightly higher rates than a purchase. If you're doing a DSCR loan, the difference in rates will vary by lender but generally cash-out refinances will result in a slightly higher rate.
Correct, I was referring to DSCR loans as a delayed purchase.
Some of the lenders that I work with treat the rate as they would a straight purchase as long as they fall within their timing, pricing, and regional parameters, which is why I requested some more information. - 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
just curious if you'll share more about this purchase. i think you had posted in another thread about starting out of state, and i'm curious where you chose.
are you talking to lenders already? in my experience the longer you wait, the better terms you'll get - after 90 days more options, after 6 months more options, etc. there are also fewer options for loans under 100K. i am refinancing a hard money loan into a DSCR loan right now and i had to wait 90 days to get the terms i wanted.
- New to Real Estate · Los Angeles · Member since 2022 · 43 posts · 41 votes2y
Quote from @Nicholas L.:
just curious if you'll share more about this purchase. i think you had posted in another thread about starting out of state, and i'm curious where you chose.
are you talking to lenders already? in my experience the longer you wait, the better terms you'll get - after 90 days more options, after 6 months more options, etc. there are also fewer options for loans under 100K. i am refinancing a hard money loan into a DSCR loan right now and i had to wait 90 days to get the terms i wanted.
sent you a PM!
- 2yJake AndronicoBusiness MemberRealtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votesThere is a product offered by All Western Mortgage that is designed intentionally as you're describing.
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
I think it can be an awesome strategy.
It's called Home Simple.
Curious if you go through with it! Best of luck to you. - Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes2y
Quote from @Matthew Crivelli:
If you are doing delayed financing the loan would be based on LTC (loan to cost) and you would be getting purchase rates. This can be done within the first six months after the initial cash purchase. A cash out refinance is based on LTV, has seasoning requirements, and would be subject to higher rates.Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
I would shop around, maybe the LO you're dealing with is inexperienced and is mis communicating or they may just have odd lending practices?This! I have done several Delayed Financing deals and I never encountered a higher interest rate. Since you have 6 months to complete this process (this allows time for rehab, if desired), of course the interest rate may fluctuate a little bit, depending on market conditions, but there is not an intrinsic "1-2% higher" that I'm aware of.
- New to Real Estate · Los Angeles · Member since 2022 · 43 posts · 41 votes2y
Quote from @Andrew S.:
Quote from @Matthew Crivelli:
If you are doing delayed financing the loan would be based on LTC (loan to cost) and you would be getting purchase rates. This can be done within the first six months after the initial cash purchase. A cash out refinance is based on LTV, has seasoning requirements, and would be subject to higher rates.Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
I would shop around, maybe the LO you're dealing with is inexperienced and is mis communicating or they may just have odd lending practices?This! I have done many Delayed Financing deals and I never encountered a higher interest rate. Since you have 6 months to complete this process (this allows time for rehab, if desired), of course the interest rate may fluctuate a little bit, depending on market conditions, but there is not an intrinsic "1-2% higher" that I'm aware of.
I should clarify - I'm planning on getting conventional loan. Does this still apply? I had been told you can get the same interest rate if it's DSCR but not conventional
- Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes2y
Quote from @Catherine Ding:
Quote from @Andrew S.:
Quote from @Matthew Crivelli:
If you are doing delayed financing the loan would be based on LTC (loan to cost) and you would be getting purchase rates. This can be done within the first six months after the initial cash purchase. A cash out refinance is based on LTV, has seasoning requirements, and would be subject to higher rates.Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
I would shop around, maybe the LO you're dealing with is inexperienced and is mis communicating or they may just have odd lending practices?This! I have done many Delayed Financing deals and I never encountered a higher interest rate. Since you have 6 months to complete this process (this allows time for rehab, if desired), of course the interest rate may fluctuate a little bit, depending on market conditions, but there is not an intrinsic "1-2% higher" that I'm aware of.
I should clarify - I'm planning on getting conventional loan. Does this still apply? I had been told you can get the same interest rate if it's DSCR but not conventional
I have always done conventional. Now, for the sake of completeness, I have to add that my deals were back in the 2015-2017 range, so things may have changed in the meantime (I doubt they have). I think you need to shop for a better mortgage broker who knows about these and has done them before. Even 10 years ago, not everyone could handle them. Shop around.
- Lender · Riverside, CA · Member since 2017 · 248 posts · 98 votes2y
As long as it is within 6 months of your original purchase date, the rate for delayed finance with DSCR should not be any different than if it was made with original purchase. It's pretty common to do this if you are buying something at auction or with a seller who is not allowing any windows for financing of any sort. You will not be able to get any cash out in this scenario - it is just replacing your cash with a loan in same amount. Not everyone allows delayed financing, so if you hear a "no" keep searching because MANY do.
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2y
I've done delayed financing a couple times.
You should be able to get 75% of the appraisal up to a max of your purchase price plus closing costs. That assumes conventional financing.
DSCR lenders will all have different rules.
Delayed financing works best when you're able to buy a property at a discounted rate that needs little or no work. Think something off-market that's already tenant occupied and producing.
I've done this several times with clients in Detroit where they get most of their capital, and sometimes all, back out.
But it's really a case by case basis, and it's true that at the 6-month mark you'll have more/better options.
- Member since 2018 · 1k+ posts · 1k+ votes2yThe hurdle you will run into is that a purchase money loan (mortgage, car loan, etc.) is a preferred status under the law and will take priority over other debts and claims against your assets. Why? Because we want to enable people with debts to still be able to buy stuff.
Quote from @Catherine Ding:
Hi BP!
Has anyone offered all cash then immediately refinanced to get the cash out? I am planning on doing all cash on an offer to make it more competitive and then getting a mortgage immediately after, but I was advised against doing this by a lender. He said that rates for cash out refi would be higher and you can only take out 80% of purchase price, not the ARV. I would be ok with only being able to take out up to 80% of purchase price, but I'm just worried about having to get a much higher interest rate. Anyone have any insights or experience with this? Thanks!
Your cash out after purchase will not be a purchase money loan in most cases. Therefore there’s a higher risk to the lender, for which he is compensated by a higher interest rate.
Can you get lower rates from one lender or another? Sure. The question of why are you being charged a higher rate in the first place, though, is because you are not getting a purchase money loan, so you’re not giving your lender the protections he gets otherwise. - 2yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Why not ask the seller to allow you to switch to buying with mortgage and avoid all this?
You'll also get a better interest rate.
Logical Property Management4.9458 Reviews - New to Real Estate · Los Angeles · Member since 2022 · 43 posts · 41 votes2yThe seller wants all cash and fast closing, and doing so will get us a much more discounted price
Quote from @Drew Sygit:
Why not ask the seller to allow you to switch to buying with mortgage and avoid all this?
You'll also get a better interest rate.
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