Cash out refi on new construction

5 Replies

Hi folks, I am building as owner builder with cash (to avoid the hassles associated with such loans). When it is complete, what are my options for a permanent loan?

The lenders I have talked to treat this the same as a cash home purchase and cash out refi after, and therefore require 6 months of occupancy before doing the refi. I am on track to finish this thing in 2 months, and would prefer to not have my savings tied up if possible.

Suggestions appreciated!

Yes it's definitely possible. I have done that three times now. Once it's finished like you said it will need to be occupied for at least six months. And you should be able to cash out 80% of the appraisal value.
It might be hard finding a bank that wants to give out cash but the right lender will do it.

Thanks, all the lenders I have spoken to are willing to do the refi. I managed to find a couple who would an immediate cash out, but with the same conditions as a purchase, ie loan will be based on cost involved before 6 months, not appraised value. However no one has given me any clear answers as to what constitutes cost involved for new construction. Obviously land purchase is easy, but considering we will be hands on with the majority of labor, I'm not sure how we would justify costs past materials to the bank.

@AC C.  You are correct. If you yourself are the labor, then the only way to count it in the cost of the construction, is if you bill the construction. Being that this is going to be non-arms length, it would raise all sorts of red flag.

Your situation is in a bit of grey area. Typically, to be able to do the loan on the appraised value we would need 6 month seasoning. You might be able to do it sooner, but can't be sure.

Upen Patel, Mortgage Banker

Federal NMLS# 1374243

Makes sense. This will be a long term personal residence if that makes any difference. Hoping to free up enough cash to help with the purchase of a rental property through the refi in the end

@AC C., I'm not sure if you are still apart of this group. It has a been a long time since your original post. I'm in the same boat as you were 6yrs ago. I wanted to find out your outcome and what you would suggest I try. I'm trying to avoid the seasoning period with a cash-out refi regarding new construction for an investment property. Thanks.