Cash-out refinancing to cover inheritance buyout AND remodel?

6 Replies

My brother and I inherited our mom's home when she passed away in December. She had a small mortgage left on it. We discussed selling it, but he now wants to keep it and remodel it (it needs it - outdated, foundation issues).  He's been talking to lenders, but a few of them have said that they can do loans that will pay of existing mortgage AND give money for remodeling, but buying my interest/inheritance is an issue. Evidently they can't do all three things. Is there no other way to do this? Are we stuck?

@Michelle Dickens - Sorry for your loss.  You could do a hard money loan - this is the type of loan professional flippers use.  The loans are short term, usually 6 months - 18 months and you can renovate the house and once it is done put a residential loan on it or sell the property.  If you plan on keeping it, just make sure you qualify for a residential loan on the end balance (say she owe $25k now and yo get $75k to renovate, make sure your brother and you qualify for a $100k loan.  They will usually loan 75% of the total property value)

You can also look into commercial financing, you would need to start a LLC and buy the property. You can find a commercial lender who will loan 75% of the purchase and acquisition costs. These loans are more expensive than residential, but less than hard money and will usually be for 5 years

You can looking local Austin meetup events and network with other investors to get banking recommendations or I am sure a few local Texas folks here can recommend some

https://www.biggerpockets.com/forums/521-events-an...

But you are probably getting no's because you are talking to residential mortgage bankers, which do not offer renovation financing unless you plan on living in the property.  

What is he purpose of keeping the house? It seems like it would be easier to just sell it and split the profits. If one of you plans to live in it then the other should have to buy out the other for his half.

Sorry for being unclear. He wants the house to live in it for years - A residence. I don’t want my name on the house, nor does he.

Therefore, commercial loans won’t be a fit. 

When my grandparents passed away, my mom and 2 uncles inherited their house. I had it appraised and got an FHA loan for the house and then they split the money. I would think of he could get a loan like that and then the loan can be used pay off what's owed on it and buy out your half, then use remaining to update the house. Not sure f that helps.

that’s what. I thought as well. But this lender is saying that they can do the pay off of the mortgage and the Reno portion or my interest but not all three. Does that sound right?

Originally posted by @Michelle Dickens :

that’s what. I thought as well. But this lender is saying that they can do the pay off of the mortgage and the Reno portion or my interest but not all three. Does that sound right?

Depends on the value of the property, the balance of the outstanding mortgage and how much your brother needs/wants for renovations. It sounds like either selling and splitted the profits or your brother refinancing the home with paying off the mortgage and your half of the asset. It sounds like that even though there is only a small mortgage as you mentioned in your first post that that value of the property does not have enough equity for the original loan payoff, your half of the equity in the property and the amount your brother wants to borrow for the renovation. 

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