Cash out refinance after new construction
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Lender · Macon, GA · Member since 2015 · 191 posts · 59 votes
2yQuote from @James S.:
Could someone clarify how a cash out refinance would work after new construction. I own the land with a mortgage (owe about 225k out of 287k) and am living in one of these units. I have about $150k cash on hand as well as I am planning to get a construction loan to cover the remaining cost of a duplex. My question is after the construction is complete, am I able to do a cash out refinance on the whole property to pay off the construction loan in order to build more units? If so does the cash out reset the loan to the original amount or does it increase it to include the value of the new unit (i.e. original loan was 300k and after cash out it becomes 550k?) thank you.
Hi James,
After completing your new construction, you can indeed do a cash-out refinance on the whole property if there's enough equity in the ARV. This refinance would potentially allow you to pay off the construction loan and potentially access additional funds to build more units.
The new loan amount after the cash-out refinance will be based on the current appraised value of the entire property, including the new construction. For example, if your original loan was $287k, and the new appraised value of the property is significantly higher due to the completed duplex, the new loan could increase to reflect that higher value, allowing you to access more capital.
Keep in mind that the exact amount you can cash out will depend on the lender's guidelines and the loan-to-value (LTV) ratio they are willing to offer. Make sure you work with a lender who understands cash-out refinancing to get the best terms.
Feel free to reach out if you have any more questions or need further clarification.
4 Replies
- 2yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
"I own the land with a mortgage (owe about 225k out of 287k) and am living in one of these units." - So you don't own the land... you have a mortgage on single family and want to convert and build a multi-family?
The entire premise of this plan relies on the appraised value of a duplex, and how much $150k gets you in your market. New construction vs. conversion or remodel will be wildly different. Without those numbers we can't really answer this question.
- Lender · Macon, GA · Member since 2015 · 191 posts · 59 votes2y
Quote from @James S.:
Could someone clarify how a cash out refinance would work after new construction. I own the land with a mortgage (owe about 225k out of 287k) and am living in one of these units. I have about $150k cash on hand as well as I am planning to get a construction loan to cover the remaining cost of a duplex. My question is after the construction is complete, am I able to do a cash out refinance on the whole property to pay off the construction loan in order to build more units? If so does the cash out reset the loan to the original amount or does it increase it to include the value of the new unit (i.e. original loan was 300k and after cash out it becomes 550k?) thank you.
Hi James,After completing your new construction, you can indeed do a cash-out refinance on the whole property if there's enough equity in the ARV. This refinance would potentially allow you to pay off the construction loan and potentially access additional funds to build more units.
The new loan amount after the cash-out refinance will be based on the current appraised value of the entire property, including the new construction. For example, if your original loan was $287k, and the new appraised value of the property is significantly higher due to the completed duplex, the new loan could increase to reflect that higher value, allowing you to access more capital.
Keep in mind that the exact amount you can cash out will depend on the lender's guidelines and the loan-to-value (LTV) ratio they are willing to offer. Make sure you work with a lender who understands cash-out refinancing to get the best terms.
Feel free to reach out if you have any more questions or need further clarification. - 2yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @James S.:
Could someone clarify how a cash out refinance would work after new construction. I own the land with a mortgage (owe about 225k out of 287k) and am living in one of these units. I have about $150k cash on hand as well as I am planning to get a construction loan to cover the remaining cost of a duplex. My question is after the construction is complete, am I able to do a cash out refinance on the whole property to pay off the construction loan in order to build more units? If so does the cash out reset the loan to the original amount or does it increase it to include the value of the new unit (i.e. original loan was 300k and after cash out it becomes 550k?) thank you.
I am confused on the post. Did you build a duplex or are you planning to build a duplex? What is the after repair value?
LuxePrivate Investments LLC 572 Reviews - 2yJames S.Member since 2024 · 11 posts · 1 voteOPWe purchased a property that has a duplex and single family currently. I am also getting approval to build another duplex on the land (9.4 acres)
Quote from @Erik Estrada:
Quote from @James S.:
Could someone clarify how a cash out refinance would work after new construction. I own the land with a mortgage (owe about 225k out of 287k) and am living in one of these units. I have about $150k cash on hand as well as I am planning to get a construction loan to cover the remaining cost of a duplex. My question is after the construction is complete, am I able to do a cash out refinance on the whole property to pay off the construction loan in order to build more units? If so does the cash out reset the loan to the original amount or does it increase it to include the value of the new unit (i.e. original loan was 300k and after cash out it becomes 550k?) thank you.
I am confused on the post. Did you build a duplex or are you planning to build a duplex? What is the after repair value?
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