BRRRR and Mortgage insurance

2 Replies

If I am paying cash for a house, then doing a refi to pull out 70% of money out. Will I have to pay Mortgage insurance on the new loan? Does the 30% left count as money down so that I do not have to pay Mortgage insurance ? Please help.

Bruce.  Don't want to deal with mortgage insurance?  I understand that.  The short answer is no. Here is some more info of the types of loans you may see out there.

First off, there is 3 loan types lenders may try and offer you: a commercial loan, a delayed financing loan or, a home equity loan/HELOC

A Commercial loan is done trough your LLC. They are often 5 year terms that are amortized over 15+ years. The advantages is that you can often state your own terms to the lender. They can tailor a loan to your needs. The loan is recorded on the LLC's credit and not your own. (unless you default). The down side is in 5 years you will need a new loan when the balloon payment comes up. Also, the product cost a bit more. Getting the loan is no cake walk too. You will need strong financials. I would try this first though.

Delayed financing loan is a loan the bank will offer when you already paid in cash. The sticking point here to know is, the loan will be based on purchase cost rather than market value (aka ARV). Many lenders want you to hold the home for 6 months before they will let you use the market value of your home (via a new appraisal). But! there are exceptions, Some banks will let you skip the 6 month rule and use a new appraisal value if there was extensive rehab. So ask! They are often for 15+ years terms up to 35 years in come cases.

Home equity and HELOC. This loan just pulls equity out they are normally 5 year terms but you can some times negotiate the amortization. The HELOC is a revolving line. They are often much easier to get, assuming they have first position. Some banks will use a new appraisal, Others will still only do to cost.

Here is a neat trick, Go to a small bank and first get a home equity loan.  Ask them to give you a full mortgage in 6 months based off the new appraisal. Ask them to wave all the normal closing fees of the full mortgage b/c you a getting a equity loan with them now.    My bank was able to reuse the first appraisal and waved all the closing fees.  It worked out well for us. Just go ask for it.

You do not have to pay MI because there is there is more than 20% equity in your home. 

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