Loan rates when brrrr

14 Replies

Hello everyone, I'm Andi and this is my first day here.

I have been doing a lot of research lately and i really like the BRRRR method but don't know all the details yet. Do you guys know what are the loan rates if i buy a house in cash then cash out to invest in another house ?

Hi @Andi Leka , welcome to the Biggerpockets forums!

In general the rates on the loan that you refinance onto vary depending on a few factors.  Assuming you are "bankable" and and have solid credit you'd be looking at whatever the conventional loan rate is for that day plus 0.5% to 0.75% (bump for investment properties).

@Andi Leka Welcome! Here is a guide to the most common financing options with BRRRR. If you buy all cash, just know that you will have to season the title for 6 months most likely to refinance out. That alone can slow your investing. Just a consideration.

Hi Andi, 

You can pay for a home cash, and immediately do a cash out refinance to recoup that cash. This is what is called Delayed financing. You can read all about it if you google it and put in fannie or freddie along with the search. Basically, if you aquired that cash from a HELOC, or other type of financing you will need to pay off that within the cash out refinance before you can actually get the remaining available credit. If the money was in your bank account, and seasoned for 60 days, then all of that can be recouped immediately. I just did this for someone here on BP last month on three properties. The rate is based on cash out rates. These are slightly higher than a rate/term refinance. Is this a primary residence or is this an investment property?

@Andi Leka The last 2 I financed (08/20 and 03/21) were 3.99 and 3.65. These were 80/20 conforming Fannie/Freddie loans but with the new announcement of those investment loans making up a smaller portion of the portfolio effective April 1, I expect rates to go up.

@David Kelly We paid cash for our primary home and when I inquired with the lender recently, I was told that I’d have to own the house for 6 months before applying for a cash out refinance. We bought the house on 12/2020. Could you please tell me how soon after buying could we apply for a COR?

@Andi Leka

Welcome to BP

Rates are going higher.

What @David Kelly is talking about is delayed financing.  It's very effective if you just want to get the cash you put into the purchase back out and he's obviously very good at getting those loans closed.  Most people who are BRRRRing (if that's a verb) want to use the new appraised value, after it's been renovated and rented and for that, with conventional financing (and most portfolio lenders these days if you want a decent rate) you have to wait 6 months (it's called "seasoning") from the purchase date to refinance.

Stephanie

I guess what I’m trying to find if it’s still possible to get the equity out of our home even though it hasn’t been 6 months since we paid for it? We will be moving to a different state due to work for a few years in June and instead of throwing away $$ in renting, we thought of buying for the time (4 years) we will be living in another state.

If I knew what the rates were going to be buy the time you're ready to cash out refinance I would not be a lender. I would be playing the markets and I would be far far far wealthier. Mortgage rates are a commodity item, just like the price of gasoline. It goes up and it goes down in general trends (for the most part) but since it is so tied to the global economy as a whole, there is no way to predict what your rate will be. There are so many unforeseen variables that will impact where rates are in the future. On top of that, the rate you qualify for will also usually depend on your credit score, occupancy type of the property, loan to value ratio, number of financed properties, and debt to income ratio. 

I get where you're coming from with wondering what the rate will be, but it is not worth wondering about now. Worry about it when the time comes and as long as you're making money at whatever rate is available, you're good.