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Private Lending & Conventional Mortgage Advice

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Judson Thornton Tucker JR
  • Houston, TX
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Private Loan with Mortgage and Cash-Out Refinance

Judson Thornton Tucker JR
  • Houston, TX
Posted Jan 23 2019, 04:55

Hello all,

I have some access to a private loan, however, it may not be enough to cover the entire purchase and rehab. The first solution would be for me to cover the remaining with personal cash, then attempt a cash-out refinance to pay my private loan back. 

My question: has anyone ever used a private loan to cover the 25% down for an investment mortgage and the rehab? If so, could you do a cash-out refi to repay the private loan assuming the ARV is high enough to cover? As an example if I have a $25,000 PML and I use $10,000 for the rehab. That leaves 15k to obtain a mortgage on a $60,000 home.

Let's assume a ARV of $95,000 and a cash out of 75% for $71,250. This pays the remaining 45k on the mortgage off with $26,250 to pay the private loan back (in hopefully 6 months or so).

While this is all hypothetical, I'm new to REI and want to make sure I understand all strategies before I put any offers on a home. Has anyone ever used PML for a downpayment? While I have cash to cover, I'd rather use the access I have for a private loan and keep my cash available as a reserve on the project. It feels a little funny to take out a mortgage only to turn-around and do a cash-out refi 6 months later but curious as to everyone's thoughts/other strategies you might recommend. Thanks in advance!

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