Murrieta, CA · Member since 2016 · 3 posts · 0 votes
I am a newbie and I heard that you can only cash out refinance a maximum of 4 rental properties, excluding primary residence. Is this true (and why 4?) and if so that seems pretty limiting (or a road block) as far as cashing out equity for real estate investing.
Real Estate Investor · Plano, TX · Member since 2012 · 3 posts · 1 vote
9y
That's pretty ambiguous, but in general I think what you were told was referring to the fact that conventional mortgage lenders will only lend up to 4 mortgages (and I believe that would include your primary residence).
After that you have to go to commercial, hard money, or portfolio lending where there are not any restrictions on how many properties you can have.
I guess the number is 4 because they (residential mortgage bankers) think that would reasonably cover most personal scenarios of primary residence, summer home, winter home, and vacation condo! And they aren't making their rules for the convenience of real estate investors.
Also keep in mind that with conventional financing there are rules about loan seasoning that prevent you from cash out refinancing a loan that is less than 6 months old. So if you borrow expensive money (i.e. hard money) to buy a property and rehab it then you won't be able to get a cheaper conventional loan for 6 months. If you pay cash to buy/rehab then there is a loophole called 'delayed financing' that allows for cash out refinance before 6 months, but only for the purchase price plus closing costs up to 70% LTV.
Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
9y
@Alan K. Fannie/Freddie come up with their guidelines, and lenders follow them. Each lender can be more restrictive (internal overlays), so many limit the # of loans to 4, even though you can get up to 10 financed properties.
With recent Fannie guideline update, there is no longer a restriction on cash-out refi.
Find a mortgage banker that follows guidelines and doesn't have any internal overlays.