HML to No Cash Out Refi...am I doing it right?

2 Replies

Hi All,

Could use some advice as I'm way out of my depth on the lending technicalities of my creative financing strategy. You all are an amazing group! Without further ado: I'm closing on my first BRRRR; I did a lot of research (and talked with a few possible lenders) to make sure that I could avoid the 6-12 month seasoning period that a regular cash-out refi requires by NOT using my own cash to buy the property.


The eventual solution was a HML from friends and family (they'll get a nice return) but none of us has originated loans before so we're trying to get it right. The goal is to be able to refinance two months from now at 75% LTV of new (post-rehab) appraised value.

Details:

- Purchase price of home is $48k, rehabs estimated at $32.5k (total = $80.5k)
- Loan for the full $80.5k originated by friends and family (funds coming technically from a trust that I do not control).

- Loan is interest-only, all principal and interest due in full in 13 months (it just says so on the note, no balloon rider).

The above loan does not have 5-, 15-, or 30-year terms.  We'll file the note and the deed of trust with the county at closing.  Any foreseeable problems that you all can see in refinancing the above?

Huge thanks everybody!

Where did you see/learn that you can get bypass seasoning by doing this? I would assume any lender who does a cash-out will still require you wait the 6 months or whatever their seasoning period is from the time you were deeded the property. I could be wrong so I am curious where that came from. 

Also, in most jurisdictions, I do not believe notes are filled/recorded anywhere. You do record the security instrument with the county but usually the note is not.

@Brian Bistolfo The lender doing the refinance will look at ownership to determine seasoning and care less about how the purchase was financed.  That being said, there are lenders doing cash-out refis with less than 6-12 months of seasoning.

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