Cash then refiance or just take out a mortgage?

4 Replies

I've found a duplex I'm interested in buying in NJ.  I have the ability to purchase it cash and then later refinance, or I can just take out a mortgage for the property.  I would live in neither unit and rent out both.

Which is the better move? Are there any limitations to purchasing cash and then refinancing? Any timing issues I may be unaware of? Do I have to wait to pull my cash back out for a period of time? I can get a 80% LTV mortgage fairly easily, would refinancing a cash purchase be able to get me back to an 80% LTV?

What are the advantages and disadvantages to each?

If you are planning to get a loan, then why would you buy cash and get a loan? Cash gives you a great price? Also, you usually need to wait 6 months in order to get a good rate/term. While no one can accurately predict the interest rate, if I have to guess, it's going to go up, so why not just get a loan now?

I posted this exact question a few weeks back. What I learned is that you can usually only get 70-75% LTV with a cashout refi. 6mo waiting period is common. However, a woman on one of the podcasts (don't remember which one) mentioned how she did her first deal in cash and financed it 20 days after closing using a "delayed financing exemption" . So I guess there are some ways around the waiting period.

Purchase the property with loan. 

cash allows you to move QUICKLY against competition to lock in a unit.

If you have the unit secured, then just get a loan upfront.

if you buy cash you may also be restricted to 75% LTV and seasoning periods.

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