Can you refinance a property with a conventional loan if its in an LLC?

[Mohammed Milord]

Let's say you bought a property using a hard money lender, and you put the property in an LLC. Is it possible to than refinance the hard money loan through a conventional bank if the property is in an LLC?

[Chris Seveney]

Quote from @Mohammed Milord:

Let's say you bought a property using a hard money lender, and you put the property in an LLC. Is it possible to than refinance the hard money loan through a conventional bank if the property is in an LLC?

 Great question. You will not get a conventional loan like owner occupied with lower down payment etc. you can get a loan but you will need 20-25% down. 

Note for everyone using a HML, make sure you understand how you are going to exit the deal with the HML to get out of it. If you are selling it that is an easy scenario but if you cannot sell it and need to keep it make sure you reviewed this scenario before you buy a property.

[Andrew Postell]

@Mohammed Milord hmm, so the answer here is "yes, but.."

So, you can still get a conventional loan but the loan will require you to transfer the property to your personal name at closing. The loan is in your personal name with conventional lending and the property is in your personal name at closing. You can switch the property to your LLC name after closing...but the mortgage will always be in your personal name.

And just to be clear, there are 2 main types of loans for investors: “Conventional” and “Portfolio”

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac (if you recognize those names). These loans are all 30 year fixed rate loans. They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans...they have more rules...but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending. Fannie/Freddie money = Fannie/Freddie rules. NOT the bank's own money.  Play by those rules, get better terms on the loan here.  One of the rules here is that the loan and property need to be in your name.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. These loans are a lot more flexible than "conventional" loans. Bank's money = Bank's rules. If they like you, then maybe they will lend to you. But since there is a limit to how much money the bank has access to....their rate will be higher...and usually with a prepayment penalty. Here there is no such thing as a "Debt to Income" ratio...because your income doesn't matter.  More Flexibility but worse terms on the mortgage.

I hope all of that makes sense but feel free to reach out with any other questions.  Thanks!

[Erik Estrada]

Quote from @Mohammed Milord:

Let's say you bought a property using a hard money lender, and you put the property in an LLC. Is it possible to than refinance the hard money loan through a conventional bank if the property is in an LLC?

 Hey Mohammad, 

You may refinance the loan if the property is held in an LLC however many lenders will require you to close in a personal name.

You can close in an LLC with a DSCR loan and best of all is that the rates are getting much better on these compared to a conventional mortgage, with less paperwork to qualify.

[Mohammed Milord]

Quote from @Erik Estrada:

Quote from @Mohammed Milord:

Let's say you bought a property using a hard money lender, and you put the property in an LLC. Is it possible to than refinance the hard money loan through a conventional bank if the property is in an LLC?

 Hey Mohammad, 

You may refinance the loan if the property is held in an LLC however many lenders will require you to close in a personal name.

You can close in an LLC with a DSCR loan and best of all is that the rates are getting much better on these compared to a conventional mortgage, with less paperwork to qualify.

@Erik Estrada Thank you so much!

[David Ross]

You won't get a "vanilla" Conventional loan with the property being held in an LLC - you'll be limited to more niche type programs (such as the DSCR mentioned above). Erik makes a solid point that the gap between a vanilla conventional loan (on an investment property) and the DSCR loans is closing though - so for the time being, it's not too big of a cost difference in many scenarios.

[Robin Simon]

Quote from @Mohammed Milord:

Let's say you bought a property using a hard money lender, and you put the property in an LLC. Is it possible to than refinance the hard money loan through a conventional bank if the property is in an LLC?

This is one of the main reasons people go with DSCR Loans or other similar options versus conventional - ability to do LLC, especially with the BRRRR Method (which sounds like what you are doing).

PS - heres an article published on BP which includes pros/cons/differences on financing options for BRRRRR hard money/refis

https://www.biggerpockets.com/blog/brrrr-loans-what-are-the-...

[Jacob Sherman]

Yes you can definitely use the DSCR program which is a 30 year fixed no income no doc program with an option to be in an LLC since its a commercial mortgage .