Do I have to wait for 6 month seasoning before refi?

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Do I have to wait for 6 month seasoning before refi?

Dan S.
Cherry Hill, NJ · Member since 2016 · 25 posts · 2 votes

Hi,

I am looking to purchase a property for 41K that should appraise for about 60k. I was planning on purchasing with cash and refinancing out as quickly as possible. All I ever heard was waiting for 6 months to do the refinance  - that that was/is the seasoning period required by traditional lenders. But, I was listening to a podcast yesterday (I forget which one) and the story included a guy buying with cash and refinancing right away based on the appraised value.. Does anyone know of this? Thanks in advance.

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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y

If you refi for rate and term (just getting out what you put in) there's generally no seasoning period.  The seasoning period is if you want to do a cash out (what you put in and part of the new equity).

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y

    If you refi for rate and term (just getting out what you put in) there's generally no seasoning period.  The seasoning period is if you want to do a cash out (what you put in and part of the new equity).

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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    Conventional loans (fannie/Freddie) require you to have owned the property for 6 months before using the stepped up value to pull cash out. You can rate term/refi (no cash out) with a conventional loan right away with the new value as mentioned above.   

    However, there are portfolio loans available with NO seasoning meaning with a solid appraisal you can pull cash out using the new improved value. 

    Hurst Real Estate, INC4.991 Reviews
    WebsiteView Page
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  • Jason Hirko
    Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Dan S.:

    Hi,

    I am looking to purchase a property for 41K that should appraise for about 60k. I was planning on purchasing with cash and refinancing out as quickly as possible. All I ever heard was waiting for 6 months to do the refinance  - that that was/is the seasoning period required by traditional lenders. But, I was listening to a podcast yesterday (I forget which one) and the story included a guy buying with cash and refinancing right away based on the appraised value.. Does anyone know of this? Thanks in advance.

    There are several non-conforming lenders that allow cash-out right away. The 6 month seasoning everyone always talks about is because Fannie Mae take the lower of the appraised value or purchase price in basing its loan to values. After 6 months, the purchase price is no longer factored in, so your LTV is based on the appraised value only.

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  • Dan S.
    OP
    Cherry Hill, NJ · Member since 2016 · 25 posts · 2 votes
    7y

    @Jason Hirko, @Jay Hurst, @Joe Villeneuve - thank you for your replies... makes sense -- so the term I learned was delayed financing... I hear you all that if I am just taking out what I put in then no seasoning needed  - the problem is I can't get a conventional for below 50K I am told so far. So, @Jay Hurst since this is the case, as you mention, I would need a "portfolio loan" with no seasoning with a solid appraisal at 60K, I could pull 70% out (42K) my purchase amount. Do you know portfolio lenders who will deal with those low numbers?

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Dan S.:

    @Jason Hirko, @Jay Hurst, @Joe Villeneuve - thank you for your replies... makes sense -- so the term I learned was delayed financing... I hear you all that if I am just taking out what I put in then no seasoning needed  - the problem is I can't get a conventional for below 50K I am told so far. So, @Jay Hurst since this is the case, as you mention, I would need a "portfolio loan" with no seasoning with a solid appraisal at 60K, I could pull 70% out (42K) my purchase amount. Do you know portfolio lenders who will deal with those low numbers?

     ...or, you could take on a cash partner after the fact.  What's the difference to you if you pay a mortgage company, or a partner.  I bet you can find a cash partner, that is actually looking to invest less than $50k in RE, that won't need any seasoning.

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  • Dan S.
    OP
    Cherry Hill, NJ · Member since 2016 · 25 posts · 2 votes
    7y

    @Joe Villeneuve - a cash partner who wants 5.75% for 30 years?

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Dan S.:

    @Joe Villeneuve - a cash partner who wants 5.75% for 30 years?

     No.  A cash partner that gets whatever you agree to in a "%" of the cash flow.

    What would your CF be without the loan?

    What would the loan payment be, if you could get it?

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  • Dan S.
    OP
    Cherry Hill, NJ · Member since 2016 · 25 posts · 2 votes
    7y

    Approx. $400 a month without the loan.

    Loan payments of $41K on 30 year are $239 a month reducing cash flow to about $160 a month.

    So @Joe Villeneuve I would say X person gets 50% of cash flow for a 40K loan. Do I need an amortization schedule? How would this work?

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Dan S.:

    Approx. $400 a month without the loan.

    Loan payments of $41K on 30 year are $239 a month reducing cash flow to about $160 a month.

    So @Joe Villeneuve I would say X person gets 50% of cash flow for a 40K loan. Do I need an amortization schedule? How would this work?

     Unfortunately, although the concept works, I would only apply it on a property that cash flowed much higher than this to begin with.  $239/month, without a loan, means you're only getting (if nothing goes wrong...?!?), about $2868/year.  I wouldn't do a deal with this thin a CF with a loan...or a partner, so I would have a hard time giving you any advise for adding a partner on this deal.  There just isn't any room...for a partner or a loan.  Sorry.

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  • Dan S.
    OP
    Cherry Hill, NJ · Member since 2016 · 25 posts · 2 votes
    7y

    @Joe Villeneuve - when you mean a loan - you were referring to what kind of loan?

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Dan S.:

    @Joe Villeneuve - when you mean a loan - you were referring to what kind of loan?

     Any type of loan.  The one you were trying to get.  The one you said would be $239/month"

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  • Jeremy England
    Contractor · Pensacola, FL · Member since 2017 · 311 posts · 156 votes
    7y

    I would look for a private lender.  Givem 6-8pct.  Someone would probably be glad to lend 41k at that rate out of an SDIRA.  Plus its alot easier

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