BRRRR: refinance HML to conventional

8 Replies

Hey everybody. I've dug through the forums and seen only a few light discussions on this issue, which confuses me a bit.

I've read a lot about BRRRR, and everybody talks about buying/rehabbing with hard money and refinancing in a conventional loan. Sounds pretty straightforward. But now I'm going through the approval process and learning that hard money lenders only lend to entities (LLC, corporation, etc) and conventional loans only work with individuals. So it seems impossible to rehab with hard money and refi to conventional. Is everybody either refinancing into a portfolio loan or rehabbing with cash and I've just been mis-understanding?

@Andrew Savage

I have personally used hard money and in my name. Not all hard money lenders require and LLC.

If you are just refinancing and not cashing out, there will not be a required seasoning period.

@Andrew Savage You already have a good information above but many lenders will allow you to transfer the title from your LLC to your personal name on the day of your closing with your refinance loan. Even if you only have HML's that lend to LLC's this should not be a hindrance.

@andrew savage 

I am currently in the same situation. This seems to be a a part of the BRRRR method that gets skipped over amongst all the discussions and posts out there. Your seasoning period will start the day its transferred into your personal name. I would call your lender and explain to them what you are trying to do. They will most likely give you the ok to transfer the deed from your business into personal. The sooner the better so you dont waste any more time like I did.

It has to do with a law about preventing owner/occupy using HML.

Thanks @Andrew Postell and @Jerry Padilla! I'm trying to do a cash out refi. Would transferring the title on the day of closing be a seasoning problem with the bank? ie I have only owned it for a day, technically.

@Erik B. When you say lender are you referring to hard money lender or the traditional bank? At this point both the HMLs and traditional banks seem have an issue with transferring the deed.

@Andrew Savage

As long as you are the sole owner of the LLC there shouldn't be an issue with transferring title at closing of the refinance. Some banks have overlays, but Fannie Mae recognizes LLC's as time owned. I personally have done some of these, so it can be done!

@andrew savage

sorry bout that, yes in that case I meant HML lender.

When you transfer the deed it gives the HML lender the ability to call the loan "due on sale" clause that is most likely in your note/contract.

Originally posted by @Jerry Padilla :

@Andrew Savage

As long as you are the sole owner of the LLC there shouldn't be an issue with transferring title at closing of the refinance. Some banks have overlays, but Fannie Mae recognizes LLC's as time owned. I personally have done some of these, so it can be done!

Jerry is this the same for sole owner of an S corp? Just transfer deed at refinance closing?

@Erik B. I stumbled across the Fannie guidelines that @Jerry Padilla was referring to:

"If the property was owned prior to closing by a limited liability corporation (LLC) that is majority-owned or controlled by the borrower(s), the time it was held by the LLC may be counted towards meeting the borrower’s six month ownership requirement. (In order to close the refinance transaction, ownership must be transferred out of the LLC and into the name of the individual borrower(s). See B2-2-01, General Borrower Eligibility Requirements for additional details.)"


https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html