Can’t Wrap My Head Around Cash Out Refinance

[Zachary Russell]

Hi, I’m under contract on a great deal, yet I don’t understand how my cash out refi is going to work. 

Purchase price: $105,000 (hard money).

Rehab: $30,000

ARV: $200,000

Refinance: this is where I get stuck. 
The lender I talked to does 65% LTV.

If I cash out refi at $200,000, does that mean my mortgage payment will be based on a $200,000 loan? Or will it be based on $130,000 (65%)?

Assuming a 7.5% interest rate, this is the difference between paying $909/month versus $1,398. Which one is it? How much money do I get to pull out?

Thanks for the help!

[Russell Brazil]

$200,000 x 65% = $130,000. Of that, $105,000 will go to pay off your hard money lender. $25,000 will pay you back yourself part of your $30,000 rehab. So you will leave $5,000 in the property.

You should be able to get a 75% LTV loan though. So you could cash out $150,000. $105,000 pays off the hard money lender. Pay your self back your original $30k, and have an extra $15k in your pocket.

But that is super simple math as there are loan fees on both, which would eat away at that $15k.