Cash Out Refinance (Cash Use)
Hi everyone, I am a 21 year old kid from the small town of Benson MN. I just bought my first house on a contract for deed and bought my second house as a rental using a conventional loan. I want to keep the momentum going but it is pretty obvious I am not going to just be able to keep getting conventional loans because I will run out of money on the down payments. On this first rental I plan on rehabbing it and create some forced appreciation. My question for the BP community is if I did a cash-out refi on this property after rehabbing it can you use that equity as the down payment on your next loan for the next rental property? Thanks
When you are doing the Cash-Out refi within the seasoning period guidelines, when you are asked what is the Cash for, just say that it is for property improvements, reserves in the bank or buying a new car. Loan Officers typically don't care what the cash is for (most of them just want to get paid and get onto the next one ), but they ask when they do the application because the Software they are using is requiring it.
Thanks Galen for your response, I am still a little confused however, when you do a cash-out refinance does the bank just wright you a check then? Is that how the whole thing works?
Quote from @Brady Ascheman:
Hi everyone, I am a 21 year old kid from the small town of Benson MN. I just bought my first house on a contract for deed and bought my second house as a rental using a conventional loan. I want to keep the momentum going but it is pretty obvious I am not going to just be able to keep getting conventional loans because I will run out of money on the down payments. On this first rental I plan on rehabbing it and create some forced appreciation. My question for the BP community is if I did a cash-out refi on this property after rehabbing it can you use that equity as the down payment on your next loan for the next rental property? Thanks
Hi Brady,
Yes, you would be able to use the cash-out proceeds from the refinance as the down payment for your next property. You just got to make sure you're on title for the subject property for the mandatory amount of time deemed by the lender in order to be able to do a cashout refinance. This is usually 6 months. Once you close on the refinance, escrow will either wire you the funds or send you a check for the cashout amount minus any closing costs. Hope this helps and good luck!
