Seller Financing Cash Out?

Question

Hello all, I had a funky question. This is as creative as it gets so not sure if it's possible. Currently have a property seller is holding the note for me, can I do cash out refi through him having him hold the note???

So numbers : Seller holding the note for 50k over 6 years, ARV is about 220k, want to cash out say create a 175k note and pull out 100k of cashHope that makes sense and is clear

Chris Russell · Answer

Yeah well the only reason I wasn't wanting to go through the bank is because of where rates are today. I am at a 4.125% currently and was hoping to keep that rate with the seller, which sparked this post lol

Nathan Grabau · Answer

@Jonathan Taylor makes a great point here. On 50k, 4.125% vs even 9% is only 200 a month. If the loan balance was larger, I would be more worried about the rate change, but the rate going up on that 50k should not be a factor.

Chris Russell · Answer

Yea lol so that was issue and the reasoning for making this post. I'm currently at a 4.125% and doing a normal refi would just raise my rate with the current conditions of rates

Jonathan Taylor · Answer

@Chris Russell if the monthly savings of a loan at 4.125% is better than using the cash out of 100k at 7.5% to then buy more income pencils out for you, then stick to what you have but understand the opportunity costs and what can be done with the 100k. Its not solely about rate, its about what you can do with the leveraged cash to buy more income.

Jonathan Taylor · Answer

@Chris Russell I agree with @Nathan Grabau and @David Ramirez, you're asking the current seller to give you a 100k. I have not heard of a seller who 1) has that kind of cash or 2) willing to lend it. Asking is free but its unlikely. Try refinancing with a DSCR lender as you can get a cash out if you are on title for at least 3 months.

Wale Lawal · Answer

@Chris Russell

When you are trying to make decisions about selling your home, there are often many considerations that are important to think about. When to sell, how much money to list the property for, whether to do seller financing vs. cashing out, whether to hire a real estate agent, and any repairs or renovations. These are all valid concerns for sellers to consider when selling their home.seller financing vs. cashing outSelling your home to a home buyer can eliminate several of these concerns because you will not have to hire a real estate agent, a home buyer will buy homes that need repairs, and a home buyer will give you a cash offer. There are several distinctions that are important for sellers to understand between seller financing vs. cashing out.What Is Seller Financing?Seller financing is the process in which the homeowner who is selling their home finances a loan for their buyer. This is a different process than the traditional route many Americans use in which buyers take out a mortgage with a mortgage lender, credit union, or bank. However, seller financing allows for the buyer to pay back the seller in installments over time in a similar fashion to how the buyer would have to pay back a traditional mortgage.What Is A Cash Out?A cash out is essentially the opposite of a seller financed sale. However, similarly to seller financing, cashing out does not require sellers and buyers to go through the traditional process of acquiring a loan from the bank. A cash out is where the buyer has the ability and the upfront funds to buy the property with cash. Cashing out is opposite from seller financing in that the buyer themselves are financing the purchase. Seller Financing Vs. Cashing OutThere is a clear difference between seller financing vs. cashing out. However it can be difficult for sellers to know which course of action would be best when they are selling their home. There are pros and cons to both seller financing and cashing out.Pros and Cons Of Seller FinancingSeller financing is one of several different forms of financing that exist, and within the sphere of seller financing, there are even more options and types of financing. However, the types of seller financing all have a commonality which is that the seller takes on the role of the bank and the buyer pays the seller directly. Seller financing offers several benefits to both the seller and the buyer. The seller can save on closing costs, can sell their home quicker, and can produce notable capital gains. The buyer will have better financing options, less rigid agreement terms, less closing costs, and will not be constrained by a low credit score.There are several disadvantages to seller financing, especially for the seller. The seller is at greater risk because there are less regulations that are in place to protect them and if the buyer does not make their payments. There may also be high interest rates involved.Pros and Cons Of Cash Out FinancingCash out financing has many advantages for both the buyer and seller. The seller will be able to quickly and easily sell their property and will be able to get cash for it. Cash is king, so this is great for the seller. Buyers who pay cash upfront will also often buy properties that are in need of repairs or from sellers who need to sell quickly, so it is in the best interest of both parties to use cash out financing. Buyers who buy for cash often have the funds to buy properties on a regular basis, so it is also good for them because they are able to get a property that they want. A con of cash out financing is that the selling price will have to be agreed upon. The buyer will make an offer and if it is not what the seller is willing to sell for, then an agreement will not be made. So sometimes finding the right buyer may be difficult.

All the best!

Chris Russell · Answer

Well I was thinking the cash would be printed and created from the title company lol but yea that's a good point where would the cash come from? So would have to go through a bank, dang

Chris Russell · Answer

Yeah well the only reason I wasn't wanting to go through the bank is because of where rates are today. I am at a 4.125% currently and was hoping to keep that rate with the seller, which sparked this post lol

Eliott Elias · Answer

If the seller has the cash to do it and is willing yes. Doesn't sound desirable.

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