How to calculate cash out refi

Question

hello bp,

What's the best way to accurately estimate what your new loan payment will be after a cash out refi?

Also are closing costs for a new purchase the same as closing cost for a refinance ?

Thanks for any input!

John Leavelle · Answer

Howdy @Ryan Keenan

First you need an accurate ARV/FMV for your property.  For Cash-out Refinance loans the Lender will normally provide an amount the is 70 - 80% LTV based on a current appraisal.  Typically it is 75%.  They will usually have seasoning requirements of 6 - 12 months of continuous occupation for rentals.

Is it for a recently Rehabbed property (BRRRR strategy)?  Or one you have owned for a while?

Yes, you will have Closing costs .  They can be included in the loan.

So, if you have an ARV/Appraisal of $100K and you get a 75% LTV loan amount.  Your Cash out will be $75K minus and existing loans to be paid off.

Of course the best thing to do is check with the Lenders for accurate information.

John Leavelle · Answer

@Ryan Keenan

I see where you are getting confused.  When you Refinance a property the Lender is providing an amount (Loan) that is 70 - 80% of the appraised value (Value) or 70% of $175K = $122,500.   You are required to leave some of that Value in the property in the form of equity.  In this case 30% = $52,500 equity.  That equity is acting like a down payment.  I previously showed you what the new mortgage payment is:

$122,500 Loan

4.5% APR interest rate

30 year term

$621  monthly payment (Principal and Interest)

In the future I strongly recommend you line up your Refinance Lender prior to purchasing the property.  Get pre-qualified so you know what your potential Rate and term will be.  Have that in your pocket as proof of your means to repay your short term lender.  It also makes the process a lot less stressful.

John Leavelle · Answer

@Ryan Keenan

Here's my napkin number crunching:

$100,000 Purchase price

$25,000 Down payment

$75,000 loan amount (terms?)

$750 1st Mortgage monthly payment

$$ Rehab costs ? Cash or financed?

$175,000 ARV

$122,500 New loan amount (70% LTV)  Terms?

4.5% APR/30 years payment would be $621 monthly

What kind of loan terms were you using to get $200 more per month?

$47,500 Cash back after paying off $75,000 loan (not including Holding and Closing costs)

From what you have provided and if you get a 30 year term loan I think you will have a lower mortgage payment.

Rich Hupper · Answer

@John Leavelle Thanks John

John Leavelle · Answer

@Rich Hupper

From my limited experience the lenders appraiser normally use comparable properties for SFR and Small Multi Family properties.  But I have heard they may use rental income in certain situations where comps may not be available.

Ryan Keenan · Answer

Got it! Thanks John really appreciate you taking the time!

Rich Hupper · Answer

Do the lenders look at the value of the leases in their calculations or only comparable property?

Ryan Keenan · Answer

yes, it would be two loans, one to purchase the property 100k with 25 k down at 4.5% 30 year fixed.

The short term financing at 10% but will refinance in 6 months paying it off.

Being in my first brrr property if I can get most of my money back I don't think all is lost where I've learned a ton.

I'm struggling to figure out about how much my mortgage payment might be after the refi that's where I got 868 as the mortgage payment?

After you pull the cash out and your new loan is 122,500 how do you figure out you payment using a mortgage calculator.? What do you put in as your down payment? Is it less the value of the house 52,500? 122,500-17500=52,500 in which you plug in as down payment. Totally off?

Thanks!

How to calculate cash out refi

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