Brrrr Question: Is cash out refinance income dependent?

Question

Hi BP, we plan to buy a property in cash and want to consider Brrrr feasibility thereafter. If we were to do a cash out refinance of that property is approval of the refinance income dependent (on our jobs/rental income) or solely dependent on the value of the asset one is refinancing? Thanks!

Craig Jeppesen · Answer

Yes you will need to have good credit, good dti ratio and rental history if you want to count your rental income in the dti calculation.

Caleb Heimsoth · Answer

@April Eilers. Yes it’s typically income and credit dependent.

Some lenders require 2 years, some do not

Craig Jeppesen · Answer

2 years is not necessarily true, all lenders are a little different. Check around.

The max dti is going to be around 42% or so; but you probably don’t want to get that high.

Interest on cash out refinances are usually about 25 bpts above normal rates, and terms are usually the same; 10,15,20,30 years.

It will he hard to get more than 10 properties this way but yes you can do what you are suggesting for a while.

April Eilers · Answer

Thanks for the input! I think I've heard that you need 2 years of rental history before you can start counting that as "income" that lenders will consider. Is this true? Also, what is considered a good dti ratio? Also a couple more questions:

• What are typical interest rates/terms of a cash out refi?
• Is there a limit to the number of cash out refis one can do? In other words, could I buy first house in cash, refi that, buy second house with refied funds, refi that, and so on x 50 as long as each refi was for only 70-80% of each appraised property value or would I be cut off after a point? If there is a limit, what is the limit and/or what is it based on?

Brrrr Question: Is cash out refinance income dependent?

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