Having trouble with bank refinancing in a seller finance deal?

[Jimmy Lieu]

Hello BP community,

1. If someone sells you a property with seller financing with an inflated (a way above market value) price, how can the you, as the buyer, be screwed from not being able to get bank financing? Is it because at the end of the balloon, the bank won't provide financing because I will need 20%?

2. If you have a 5 year balloon payment, should I try to refi out as soon as possible? Or after finish the rehab process? Or try to maximize the time out as much as possible and refi near the end of the 5 year balloon?

Thanks!

[Joe Villeneuve]

The bank won't refinance part of a loan.  They will want to refi the entire purchase price minus any DP you made.  So if your intention was to do this all along, and you paid way over the property value, the bank isn't the one that is screwing you.  Take a look in the mirror if you want to see who that person is.

I you paid over Property Value, and you have a 5 year balloon, then you better hope the property appreciates, and the added value from the rehab, increases in 5 years to a new value where 80% (or whatever loan % of the PV you can refi at then) will cover the balloon payment...because that's what you will be trying to refi at that time.

Paying over the PV isn't a problem.  The problem is when you added a balloon payment in 5 years to that overpayment.  I can pay (and do) over PV all the time...and make a short term, and long term killing, but I don't put such a short term deadline on a payoff.  

Please tell me your interest rate is less than 3%.