Getting out of pocket cash back after refinancing hard money loan

3 Replies

Do I understand correctly that one may be able to get their out of pocket cash back after refinancing a hard money to a conventional loan?

Let's say I bought a property for $100,000 and the property needed $25,000 rehab for a total of $125,000. The hard money loan would only lend me $100,000 and I spent $25,000 out of pocket.

The house has an ARV of $160,000. I refinance to a conventional loan and the bank will give 80% of that amount which is $128,000. Would I really be able to put all $128,000 into the new conventional loan even though my hard money loan was only $100,000? If so, would the bank just give me a check of the surplus, in this case $28,000?

Hey Ben

If the refinance u getting from lender is “cash out refi” then yes, you’ll get difference once ur original lender is paid off. Some restrictions apply though for cash refi, for me it was seasoning and up to 75% of arv. Other type of refinance simply replaces original lender with new terms.

Hope that helps

Yes, that is generally the way a "cash out refi" works.  The bank doesn't care what you bought the house for or how much the original loan was.  They care about the current value.

I've been looking to get a "cash out refi" on one of my properties. Getting an 80% LTV from a bank on a non-owner occupied property seems a bit ambitious. I'm not saying it doesn't exist, but a 70-75% LTV seems to be much more the norm. Most of the lenders I've spoken to require at least 6 months seasoning. Some of them have required 1 year seasoning.

Another strategy might be to get as high of a loan as possible up front (i.e. finance both purchase and rehab), and then just do a rate & term refinance (instead of cash-out) so that you don't have to wait 6-12 months.  You'll usually get a better interest rate with a rate & term refi (since banks don't like cash-outs).