Before 6 months refinance

Columbia, Maryland
Private Lending & Conventional Mortgage Advice
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Before 6 months refinance

Jonathan Tavarez
Flipper/Rehabber · Laurel, MD · Member since 2016 · 139 posts · 109 votes

I got a financing strategy question. When I buy a property all cash, I need to wait 6 months to do a cash refinance and get my money out BUT somehow if I get a hard money loan to buy a property (technically not my cash) the mortgage broker can refinance me out of the hard money loan with a bank the day after closing. So, I asked the mortgage broker how exactly that works/why is it that for the cash refinance I need to wait 6 months but to "refinance" out of the hard money there is no waiting period? He explained that there are 2 conditions that, if satisfied, we can refinance before 6 months. First condition is that no actual cash is given out at closing and second is that there needs to be a deed transfer (or similar). This got me wondering, is there a way to do all this without working with a hard money lender? For example, can I set up an LLC with a bank account, put my cash in the LLC and then do a loan against the LLC that is then refinanced under my name and the LLC gets paid? I'm just looking for a way to not have the money stuck in the deal for 6 months.

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
3y

I agree with Jason, 

You can do a rate and term refinance if you choose to use hard money (no seasoning requirement). 

You can also do a delayed purchase refinance, usually about 75-80% of the purchase price + rehab cost or appraised value (whichever is lower), (no seasoning requirement) 

Lastly you can do 3-months seasoning with a DSCR cash out refinance and use the new appraised value

[email protected]818-269-7983
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  • Jason WrayPro Member
    Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
    3y

    Jonathan,

    Your broker is not telling you all of your options. You can in fact refinance with (No wait) if you pay all cash. There is No title seasoning when you pay all cash you can take out 80% LTV of the purchase price same month. You cannot use the appraisal value you use the purchase price up to 80% LTV.

    If you buy a house for $100K "All Cash" you can take out $80K same month no wait.  This is called Delayed Financing which is like a purchase/refi cash out all in one.  There are No prepayment penalties and its a great way to keep using your capital to buy more doors.  Hard money loans are horrible and only good if the property cannot pass an appraisal deemed "Subject to".

    [email protected]727-637-4289
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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3y

    I agree with Jason, 

    You can do a rate and term refinance if you choose to use hard money (no seasoning requirement). 

    You can also do a delayed purchase refinance, usually about 75-80% of the purchase price + rehab cost or appraised value (whichever is lower), (no seasoning requirement) 

    Lastly you can do 3-months seasoning with a DSCR cash out refinance and use the new appraised value

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    2Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Jonathan Tavarez:

    I got a financing strategy question. When I buy a property all cash, I need to wait 6 months to do a cash refinance and get my money out BUT somehow if I get a hard money loan to buy a property (technically not my cash) the mortgage broker can refinance me out of the hard money loan with a bank the day after closing. So, I asked the mortgage broker how exactly that works/why is it that for the cash refinance I need to wait 6 months but to "refinance" out of the hard money there is no waiting period? He explained that there are 2 conditions that, if satisfied, we can refinance before 6 months. First condition is that no actual cash is given out at closing and second is that there needs to be a deed transfer (or similar). This got me wondering, is there a way to do all this without working with a hard money lender? For example, can I set up an LLC with a bank account, put my cash in the LLC and then do a loan against the LLC that is then refinanced under my name and the LLC gets paid? I'm just looking for a way to not have the money stuck in the deal for 6 months.


    There is somewhat of a "glitch" in the loan pricing markets where if its a "cash-out refinance" there are lots of restrictions (loan amount, LTV, seasoning) but if its a "rate-term refinance" (ie getting less than $2k at closing), then all those restrictions disappear. This ends up penalizing someone who buys all cash versus someone who uses max leverage! (makes no sense).

    That being said - be careful "gaming the system" with this as good lenders and brokers will catch on and deal may die at the end

    [email protected]
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  • Jonathan Tavarez
    OP
    Flipper/Rehabber · Laurel, MD · Member since 2016 · 139 posts · 109 votes
    3y
    Quote from @Jonathan Tavarez:

    I got a financing strategy question. When I buy a property all cash, I need to wait 6 months to do a cash refinance and get my money out BUT somehow if I get a hard money loan to buy a property (technically not my cash) the mortgage broker can refinance me out of the hard money loan with a bank the day after closing. So, I asked the mortgage broker how exactly that works/why is it that for the cash refinance I need to wait 6 months but to "refinance" out of the hard money there is no waiting period? He explained that there are 2 conditions that, if satisfied, we can refinance before 6 months. First condition is that no actual cash is given out at closing and second is that there needs to be a deed transfer (or similar). This got me wondering, is there a way to do all this without working with a hard money lender? For example, can I set up an LLC with a bank account, put my cash in the LLC and then do a loan against the LLC that is then refinanced under my name and the LLC gets paid? I'm just looking for a way to not have the money stuck in the deal for 6 months.

     Thank you all for the information!

    1Reply
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