70% LTV for Refi instead of 80%

4 Replies

Hello BP! I have been reading and listening to BP since the really early days and learned a tremendous amount. Thank you! Now I have a specific question: My rehab project on 3-unit property was completed in December and rented almost exactly planned. I went from 12% equity based on 10% down on original loan of $120,000 in late 2016 to having about 35% equity, $180,000 value against original loan of $120,000. The plan was to be able to refi / cash out at 80% LTV. However, all the regular Fannie lenders want 70% LTV now which doesn't allow me to sensibly refi/cash out with only 35% equity. Am I now in the realm of hard money and need to accept that any cash out refi will be at around 7% or is there any other way to do the cash out refi with 80% LTV and get the lower interest rates? Note: I am nearly 100% passive investor with a property manager who is doing the rehab work, and dont intend to do a horseback although I looked at that to use a VA loan but in the end determined it wasn't feasible for our situation. thanks for any insights on how to get around this 70% LTV requirement on. 3-unit property.

Most of the conventional lenders will want to sell their loans to Fannie which means they need the loans to fit into a box. However, if you are willing to put in the work there are ways around it. There is the hard money route as you mentioned, but I doubt that makes too much sense for your situation. The other route that I can think of is trying to establish a relationship with a number of small community banks to see if there is one that would be willing to give you a portfolio loan at 80% LTV.

@darin, If you are considering a VA loan, then can we assume that you are living in this property? If so, then you will be a bit hamstrung as regulations are quite a bit different than in the commercial space which has loan products that are designed for exactly what you are trying to do. Agency loans are great, but for BRRRR type deals, they tend to be a bit rigid.

Originally posted by @Darin L. :
Hello BP! I have been reading and listening to BP since the really early days and learned a tremendous amount. Thank you!

Now I have a specific question:

My rehab project on 3-unit property was completed in December and rented almost exactly planned. I went from 12% equity based on 10% down on original loan of $120,000 in late 2016 to having about 35% equity, $180,000 value against original loan of $120,000.

The plan was to be able to refi / cash out at 80% LTV. However, all the regular Fannie lenders want 70% LTV now which doesn't allow me to sensibly refi/cash out with only 35% equity.

Am I now in the realm of hard money and need to accept that any cash out refi will be at around 7% or is there any other way to do the cash out refi with 80% LTV and get the lower interest rates?

Note: I am nearly 100% passive investor with a property manager who is doing the rehab work, and dont intend to do a horseback although I looked at that to use a VA loan but in the end determined it wasn't feasible for our situation.

thanks for any insights on how to get around this 70% LTV requirement on. 3-unit property.

Point of clarity that might make the 70% thing moot: you know that after six months, current appraised value can be used to determine LTV, not purchase price, right?

thanks Brian, Greg, and Chris. I greatly appreciate your time, effort, and insights.My valuation is using current value 15 months after purchase. I do not live in it and dont plan to l live in it.

I think my move now is to look for local community bank with portfolio loans. 

Fun note: I reread the original post and have no idea what "hoseback" means at the end of the post! Auto-correct FAIL 😀