I just purchased a property using my heloc..property price 95k..rehab costs approx 50k..after market value will be approx 200k..I am a buy and hold investor and property will rent for 2000 a month. My question is..how long will i have to wait to refinance this property into a 30yr mortgage. My goal is to pay off the heloc to be able to use the money again. My rate is 2.75% on the heloc, and was wondering if just using cash flow from rental to pay back heloc is a better option then the refinance..Looking for advice..thx
You wouldn't have to wait at all, since there is no lien on the property you have just bought. There is a delayed financing guideline for such a situation with many banks (not all follow this though). As long as you didn't put any type of liens on the property, you can cash out to pay the HELOC back directly (must be). It's a normal cash out refinance with the extra documentation of your closing statement (HUD), purchase contract, escrow instructions and copy of the deed.
You can get a new appraisal to accomodate the new value, but you are limited to the amount you paid for the property and what you can document you spent in repairs.
Thanks, Robert for this....You can get a new appraisal to accommodate the new value, but you are limited to the amount you paid for the property and what you can document you spent in repairs.
FU Question - I am in the same position as the OP. Just closed on a SFR to buy and hold as a rental. Used my HELOC with the intention of refinancing to a 30 yr. mortgage and then rinse and repeat with the HELOC.
The lender I spoke with pre-purchase told me that I would have to wait 6 mos. to refi but 12 mos. to refi for more than we paid if it appraised out. The rehab work we did was not counted because it was mostly paint and repairs. Is this typical of banks, do you know?
@Camille Pronovost yes, that's why I mentioned not everyone follows the delayed financing guidelines. Standard cash out is 6 months after your purchase for a refinance. Most banks and brokers don't read past the rest of the guidelines.
But yes, you can cash out right after your purchase as long as you hold no liens on the property you're trying to cash out on.
OK, that helps me a lot. Thank you for the clarification,Robert.
Would be a good idea to check with the bank or credit union you will be refinancing with to see if they stick to the delayed financing guidelines, and if they don't go elsewhere?
yes, I would do exactly that. Ask the question if they follow delayed financing guidelines, and if you can get a new appraisal. Be prepared to go elsewhere. The appraisal question is usually a good quick indicator as to if they know how to do delayed financing. Many brokers or bankers mindset who do NOT do delayed financing will automatically say that you can't get a new appraisal until 6 months after you purchase. It's a good filter.
Thank you Robert, invaluable information :)
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