Equity Available at Purchase

[Dave S.]

Maybe there is a simple answer to this that Im overlooking...Here is the deal. Property is worth $150K but Im purchasing for $125K, can I utilize this equity at closing some how???? If not when is the soonest i can use this equity and how?

[Chris Mason]

Private or hard money lender might give it some value.

Whelp, let me think out loud here for a second, other lenders please chip in if I'm missing something.

Let's suppose it will appraise at $150k, both today and during a refinance. 

Let's say hard money lender might count that $25k of equity provided that you come in with at least 10% skin in the game.

You come in with $12.5k.

Lender lends you $112.5k based on them counting another $25k of equity in the deal.

You turn around 5 seconds after closing, and rate/term refinance. Lender's appraisal indicates $150k value, meaning $112.5k is 75% LTV.

• Two sets of closing costs.
• Depending on where appraisal falls, you might have to pay closing costs out of pocket, or come in with money to meet the LTV requirement.
• No guarantee for what traditional lender's appraisal will come in at.
• Hard money lender will likely charge points up front.
• Another month or month and a half of mortgage BS in your life.

Do your math to ensure it makes sense. Ensure the HML doesn't come with a prepayment penalty. All of the six months seasoning bla bla bla requirements are for cash out refinances. In this scenario, we're setting it up explicitly and intentionally so it would be a rate/term refinance.