Cash Out Refi Question

11 Replies

Hi Everyone!

I'm finally almost done renovations on my three unit property and I have leases on all units. I want to do a cash out refi. My lender says they can do up to 70% LTV. I was just wondering how common 75% is and if I should go through the trouble of looking for a needle in a haystack...or 75% LTV is common?

It’s zones historic commercial. Two residential units, one commercial. Loan balance is $140k. Appraisal estimate likely $325k-$400k. Comps are extremely difficult in this area. Units are so different.

Anyway, just the LTV is my question. What's the most common %

Thanks!

Promotion
BiggerPockets
The one-stop-shop for REI
Find Local Home Improvement Pros!
Check out our network of trusted, local contractors for all of your home improvement projects.
Find a Contractor

Hi @Kelly McMillan, the LTV depends largely on the property DSCR (Debt Service Coverage Ratio = Income from rent/expenses). Different lenders have different minimums and requirements, I would be happy to help you find out what is the highest LTV you can get. Feel free to send me a message.

@Shaun Ashkenazy thank you. Is that true if I’m trying to get a residential loan not commercial. I want a 30 year. My lender said I can get residential because the retail space falls below a certain percentage.

Lenders have differing criteria. For example, I've seen some lenders price a loan at 75% a full percentage point higher than a 70% LTV loan, and two points higher at 80% LTV. If you have sufficient income history, the price might come down. It pays to work with a commercial mortgage broker who specializes in cash-out refinancing. You will pay an additional 1% in fees up front, but you will get a better loan overall. In many cases, I've taken the lower loan amount and then put secondary financing for 5-10% of the value behind the senior lender at 70%. The secondary financing is much more expensive, but it's on a small percentage of the loan. So the blended rate could much lower than a high ratio loan with a single lender.

Originally posted by @Kelly McMillan:

@Shaun Ashkenazy thank you. Is that true if I’m trying to get a residential loan not commercial. I want a 30 year. My lender said I can get residential because the retail space falls below a certain percentage.

From my experience, 80% LTV is the max anyone can get and definitely a valid option with some lenders. Regardless if it is residential or commercial, the DSCR plays a significant role in determining the max LTV for your property (other things that effect LTV include your credit score, location, property type, seasoning, etc). Your best bet, as mentioned before me, is to use a broker that will shop around for you, this will save you time, and you will probably get the best possible option.

@Kelly McMillan Conventional residential cash out guidelines allow for 75% on a single family and 70% on a 2-4 unit. 

On a side note you may have some challenges getting conventional residential financing for a mixed used property.