I understand that you need to refinance after you have completed repairs. Specifically how does a refinance work?
If I am all in at $100,000 and my after repair value is $180,000.. in the bank gives me 70% of that = $126,000.. Awesome, but exactly how does that Shake out?
I now have a new loan for $180,000 do I have to put a down payment on to the new loan? like a new purchase? or am I just financing straight $180,000?
and my mortgage payments are based on what 180,000+ whatever the interest rate is? or what?
I know silly questions but I appreciate any help.
No silly questions here! Once you are done with the rehab and you have a renter in place, you will refinance the property. The appraiser will say your house is worth $180k and they will give you a loan for 75%-80% of that. They will cut you a check for $126k so you can pay off other debts you might have associated with the property. Now you have a loan for $126k that you will be making monthly payments on. The down payment is the 20%-25% the bank is making you keep in equity.
The monthly payment will be based on $126k plus the interest payment and don't forget about property taxes.
New loan - ~70-80% of the ARV (126k in your example - paying yourself back the 100k, plus 26k extra)
Closing costs (generally rolled into new loan) - lets say 4k for example (you should shop around to see best option)
Total loan amount that you are paying back monthly - 130k (plus insurance, property tax)
Dont forget about the seasoning period though! Most banks will make you make 6-12 months in order to do a cash out refinance. There are banks that will let you refi earlier than that, but there are more limitations to the total amount you can get (the amount of your original loan if you used a hard money lender, for example)
Hope that helps!
Okay, my primary concern was that I would have to come out of pocket again..for a down payment plus additional fees ..
but I understand now that my down payment is the equity left in the deal for the bank.
Thank you so very much.