Pay "cash" and then refi, or seek mortgage up front?

Question

I'm aiming to purchase my first small multi-family in Ohio; probably in the $50k-$80k price range.

Is it better to pay "cash" and then refi, or seek a mortgage up front?

I say "cash" in quotes because it will come from my HELOC (primary residence). I'd like to have my money available (or 75% of it, at least) ASAP after my purchase.

I'm sure the answer to this question will include "it depends" ... I welcome any advice and clarifying questions!

Thanks!

-Cass

David M. · Answer

@Cassie Wright, Jr.

Sort of depends...  The market is still relatively hot so you may need a cash offer to get the offer accepted.  Yes, with mortgage rates there is a risk that you may not get as cheap as a loan, but you may miss on the deal entirely if your offer is with financing.  Try looking into delayed financing.  Conforming loans allow you to take out a loan within 6 months of closing with a LTV based on the purchase price of the property.  So, this doesn't work well if you are reno'ing and planning to have some force appreciation.

Otherwise, it sounds like your plan is "mostly" the same price since you aren't getting two loans...

Make sense?  Good luck.

Account Closed · Answer

I don't always make the wisest choices when it comes to getting the cheapest financing, but I do like to keep my finances simple and clean where I know exactly where I stand and what I will have to pay from beginning to end. Put another way, I don't like to purchase a property with terms and conditions that may not pan out such as purchasing with cash, or purchase with seller financing and then have to worry about whether or not something won't happen where I cannot get the financing down the road that I hoped to get, or can't make a balloon payment because some unpredicted factor stopped me from getting an expected loan, or I had to used the money I needed for an emergency. I try to avoid situations that caused thousands of investors lose money in the 2008 crash.

I purchased many property with 100% cash and later found banks would not give me loans for 6+ months and even after 6 months many banks turned me down because they don't give loans for less than $50,000 or had other excuses.

I do give the investors credit who can follow through with their plans and save a lot of money by doing things suggested in this thread. My problem is I get nervous and worry about the inability to get the loans or to make the changes when I need to. I applied for a line of credit in April 2021, the line of credit was approved by the underwriter in October and I was supposed to notarize the escrow documents, but until this past week the bank sends me emails every few days asking me to provide or sign documents I already gave them. I have been assured many times the line of credit will be finalized, but 10 or 11 months is crazy to get a loan and imagine what position I would be in if I desperately needed the money to cover some sort of creative financing deal. I would be in boiling hot water and that is why I stay from many suggestions in this thread.

Ned Carey · Answer

@Cassie Wright, Jr. I would go for the fastest way you can get long term permanent financing.  The reason is right now there is  risk of not getting the refinance or rates going up. Seasoning issues may be at play here. (how long you must wait to refinance).

If you can get a low 30 year rate at the purchase I would do it. But you may be buying a fixer upper or otherwise non cash flowing property, so it may be hard to get the best purchase financing. That is an example of when you would go with the two step method,pay cash and refinance.

Carlos Asuaje · Answer

If possible, this might be a great deal to use seller financing to acquire the property and later refinance. I closed on a deal for a duplex last month where I convinced the seller to give me terms on a 10 year mortgage which I plan on refinancing on much sooner then that. This method could keep a lot of money in your pocket and also can close a lot faster then with conventional financing. It might take a little more selling on your part and a little more leg work to make it happen but for me it's really been great!

Pay "cash" and then refi, or seek mortgage up front?

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