hey guys so I'm trying to do my first BRRRR, I've got the hard money lender part figured out. The part I am struggling on is finding a lender that can do a cashout refi after the rehab...Apparently it's a federal restriction that you have to wait until after 6 months of purchasing. Is that true? I am in Virginia fyi. Thank you!
Hampton, VA · Member since 2017 · 24 posts · 16 votes
5y
You can always try a mortgage broker and they will have a portfolio of lenders who can help you out. I had a similar problem a few years ago where I had to cash out my seller quickly and a broker helped me out. Of course you will pay more for it at closing but in a pinch that's an option. Much better than paying penalties to a HML
Hampton, VA · Member since 2017 · 24 posts · 16 votes
5y
You can always try a mortgage broker and they will have a portfolio of lenders who can help you out. I had a similar problem a few years ago where I had to cash out my seller quickly and a broker helped me out. Of course you will pay more for it at closing but in a pinch that's an option. Much better than paying penalties to a HML
Lender · Nashville TN - Licensed in AL AR DC FL GA LA MD TN, TX and VA · Member since 2021 · 583 posts · 338 votes
5y
@Tein Hlwa - there are renovation Loan products where you can finance the cost of the renovation as part of the loan. This way you’d only have to come out of pocket for the down payment. You also only have one closing. Message me if you want more information.
@Tein Hlwa - there are renovation Loan products where you can finance the cost of the renovation as part of the loan. This way you’d only have to come out of pocket for the down payment. You also only have one closing. Message me if you want more information.
Hey Reid, appreciate the input. I am familiar with reno loans. I am talking more about refinancing after the renovation to take out the equity in cash.
You can always try a mortgage broker and they will have a portfolio of lenders who can help you out. I had a similar problem a few years ago where I had to cash out my seller quickly and a broker helped me out. Of course you will pay more for it at closing but in a pinch that's an option. Much better than paying penalties to a HML
Do you have any recommendations? I spoke to 2 brokers I normally work with an nothing. I found one that said he can do it once I get up to 5 rentals which I am not up to yet.
-If you want to refi for just the amount of your hard money loan (Rate and Term refi) you can do it at any time. -If you want to refi fir More than your hard money loan (Cash Out refi) you have to wait 6 months for a conventional loan.
-If you want to refi for just the amount of your hard money loan (Rate and Term refi) you can do it at any time. -If you want to refi fir More than your hard money loan (Cash Out refi) you have to wait 6 months for a conventional loan.
Gotcha, its weird how no one seems to mention this during the BRRR videos as I think it seems important to know.
@Tein Hlwa - there are renovation Loan products where you can finance the cost of the renovation as part of the loan. This way you’d only have to come out of pocket for the down payment. You also only have one closing. Message me if you want more information.
Hey Reid, appreciate the input. I am familiar with reno loans. I am talking more about refinancing after the renovation to take out the equity in cash.
Depending on your particular circumstance, the renovation loan could be less costly and more efficient than the hard money + refinance option. With the reno loan on an investment property you can get a loan for up to 85% of the lesser of the ARV and the loan + reno cost. This negates the need to cash-out refi to get your money back out, because you didn't have to put a bunch of money down to begin with. Also, on cash-out refi's right now most lenders are requiring you to maintain at least 75% LTV, which doesn't leave much equity for you to actually pull cash from these type deals.
Investor · Roswell, GA · Member since 2016 · 34 posts · 17 votes
5y
@Tein Hlwaa
6 months is the minimum for Fannie/Freddie loans which generally have the best terms. Portfolio loans can do with less seasoning time but you will pay for it with a slightly/moderately higher rate.
If you paid cash you have another option called “Delayed Financing” that will allow you to pull out purchase price plus closing costs. They will not allow additional fund for renovations or forced appreciation(Fannie/Freddie product). You can do this without a time restriction but you will leave equity tied up in property.
I personally would wait for the 6 months unless you needed the cash right away.