Cash out Refi Terms.... What is customary? Length of term?

Question

I spoke to a local, Panama City, FL bank today about their willingness to fund my BRRRR project. I was told they would go 75% LTV at 6.25% with a 15 year amortization. There is no way I can cash flow with those terms. On rental property projects like this, have you seen banks do longer terms?

I plan to buy the house using all cash.

Curtis Harvey · Answer

@Bryan Crow If you ask a question 10 times you may get 10 answers. If you only reached out to one bank, I would have at least called 10 lenders( regional banks, Credit Unions, and Conventional as well). They will all give you different rates and terms. Do no let give you and answer and assume that all of them will give you that same answer. I have had some quote me similar terms and other with better terms.

Something that is most important is there enough of a difference between the purchase price plus repairs and the ARV. Remember cash out refi is great but make sure it is within your investing strategy. It works great in the BRRRR strategy in cases when the force appreciation has value.

Bryan Crow · Answer

@Jack Halldin Thanks for the input. Paying cash gives me an advantage in this market as the inventory of 3-2s is extremely tight.

Bryan Crow · Answer

@Curtis Harvey Point taken. I will talk to other lenders. I was just curious about others' experience. Thanks

Bryan Crow · Answer

Thanks Gentlemen. My takeaway is that since the house will be titled in a corp, a conventional loan is not an option. My avenue of pursuit is to find a lender who will extend a 25-30 yr amortization. That will allow for proper cash flow in the deal.

Jay Hurst · Answer

If the house is titled in an LLC even if paid for in cash you would NOT be able to get a conventional loan. Fannie/Freddie will require it to be titled in your name for 6 months before you can cash out. So, again, titled in an LLC your only option would be a portfolio loan.

You should be able to get a 30 yr amortization on a similar if not a little better on a portfolio loan but you would not get the mid 4's on a 30 year fixed that you could get if it was titled in your personal name assuming good credit using conventional "delayed financing". Delayed financing is just a fancy word for pulling cash out of a free and clear property that you owned for 6 months or less.

Shaun Weekes · Answer

The LTV is spot on but the rate for a 15 year should be in the 3's and a 30 year in the 4's. You need to find a lender with no OVERLAYS. 6.25% is actually ridiculous for a conventional loan.

I hope this helps and have a great day.

Andrew Postell · Answer

@Bryan Crow there's a lot to your question. I would suggest seeking a "Conventional" loan first. A conventional loan is a loan governed by Fannie Mae or Freddie Mac. They allow 75% of the ARV if you are refinance or 15% down if you are purchasing. Right now their standard rate is 4.875%-5.125% on a 30 year fixed SFR property. The loan the other bank told you about sounds like a "portfolio" or "commercial" loan. Seek a conventional loan and you will find better terms. HOWEVER, if you are trying to purchase with cash it will change a few things for you. It is better to create an LLC that lends a mortgage to you for the purchase of the home. I'm sure this will cause some more questions so ask away!

Bryan Crow · Answer

I am discussing future plans with the bank. I am actively looking to purchase a property now with cash. My discussion with the bank was to learn what terms are available in this market to refi. This was my first bank to have this discussion with. The house will be titled in a corporation.

Thanks.

Jay Hurst · Answer

How long have you owned the property? Is it titled in your name or in an LLC?

Cash out Refi Terms.... What is customary? Length of term?

Cash out Refi Terms.... What is customary? Length of term?

Most Popular Reply

10 Replies