Mortgage Broker Questions

[Steve Guerra]

Hello Everyone

I have some questions about borrowing from a Mortgage broker.
Well first off I found one in my area. They require 25% down for any investment property. They can only fund properties 70k and up. Their Non Owner occupied interest rate is between 5.25% to 5.75%.

Now what i want to do is Purchase a property, rehab it and create equity. Once equity is created I will refinance (to the amount it will cashflow).

Now my question is lets say i purchase a property it cost me 70k I put 25% thus borrowing 52k. I rehab the property and after words they appraise it and its worth 120k. I put in 20K in it. Can I refinance and get my down payment and the 20K i invested back? I spoke to the Mortgage broker and she said that i should save all my receipts so when they refinance they can add that into the appraisal. Or maybe I din't understand correctly..

Anyways I appreciate your help i advance!!!

[Dion DePaoli]

Steve, cash out refinances on non owner occupied properties require 12 months title seasoning. Saving receipts to prove improvements will be useful in the event the appraiser wants proof of improvements. However that will not let you take any cash out of the property. J

In your example of $70k purchase, $52k loan, $20k improvement and $120k ARV. The cash out refinance max LTV is 70% so your loan would be $84k. You would have to pay off the existing lien and you would net $31k. So you would be into the property still for $11k of your money.

You should expect to have leave some equity in the property lenders are very aware of market conditions and are not inclined to let you get out with no risk and them take on all the risk on investment properties. As I said the max LTV was 70%, some lenders might have a lower ratio than that even.