Re - Financing - What are the basics

2 Replies

I've heard few different things about re financing and what to know what my options really are.  Are "streamlined" re finances with 0 points and minimal costs a real thing?  What are my re finance options if I purchased a house with cash?

Cost to do it depend on the lender.  Shop around.

If you buy a house with cash, depending on the lender (again), you will need to wait for a certain period of time (seasoning period) before they will value the house based on the other comps in the area.  Before that seasoning period is reached, they will value your house based on what you paid for it...with the "asterisk" that you can increase it with rehab...by the documented cost of that rehab.

Once that seasoning period is reached, if the comps in the area are high enough, you can get out more money in a refi than you put in (cash out refi). It's all based on the % of LTV/ARV the lender uses.

Example:  REFI right after rehab...and before seasoning period is reached

$80,000                 Sales Comps in the area
$50,000                 Cost of property
$10,000                 REHAB done
$60,000 Immediate effect of rehab on ARV
$45,000                 Amount of refi (based on 75% of ARV)
$15,000                 Cash still in property

Same as above, but this time you wait for the 6 month seasoning period to be reached

Example: REFI with rehab...but after seasoning period is reached

$80,000                Sales Comps in the area  
$50,000                Cost of property
$10,000                REHAB done
$60,000                Total cost in cash in Property
$60,000 Amount of refi (based on 75% of ARV)
$         0                Cash still in property

Same as above, but this time, not only do you wait for the 6 month seasoning period to be reached, but the Sales Comps in the area are actually $88,000

Example: REFI with rehab...but after seasoning period is reached

$88,000              Sales Comps in the area
$50,000              Cost of property
$10,000              REHAB done
$60,000              Total cost in cash in Property
$66,000 Amount of refi (based on 75% of ARV)
$ 0                      Cash still in property
$  6,000              Extra Cash taken out at time of REFI (cash out refi amount)

@Joe Villeneuve  Thanks so much for the reply.  Love the examples that I can study and work through.  I took your advice and have started the hunt to learn more about what rates and options are out there.  Thanks!

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