Does the refinancing phase really mean refinancing from the banks point of view or is it considered a new mortgage?
@Douglas A Lewis yes that part of the phase is refinancing and it means conducting a new mortgage. This part should not mean much to you because if you have completed the steps correctly you will already have a renter in place. If you are not aware but I'm sure you are as you understand BRRRR but this is for anyone who reads this, this part of the phase is to pull that same money invested into the property out and pay off any hard money (which is usually expensive) or any other sources of money used and continue on with the same capital on the next deal. Refinancing usually provides a better interest rate than any money that you may have used. Hope this helps.
Thank you for your reply. I’m still a little confused though. There are different guidelines to be able to refinance a bank loan compared to getting a new mortgage. I just wanted to make sure that it’s considered a new mortgage not a refi in the banks eyes when I do refinancing out the hard money etc
@Douglas A Lewis It's not a refinance in the sense of taking an existing loan and refinancing it into a new loan with different terms. It's a cash out refinance, which means starting with no loan and saying "I own this property free and clear. Please give me a new loan with this property as collateral."
A refinance is paying off your existing mortgage and getting a new mortgage. A cash out refinance does the same thing, but you increase your new mortgage with the cash out, putting cash in your pocket. They are treated differently with LTV's and Rates. A cash out refinance requires a 5% lower LTV, and the rates are slightly higher as well.
On the refinance you have to ensure you have at least 70% of the new appraise value on the deal to be able to get you hard money loan pay off , any other money you put in the deal and some extra cash to be a true BRRRR.