What will you if cash out REFI's don't come back this year?

Question

A month ago, not one would have guessed we are in the situation we are in.

Considering the unthinkable, A troubling thought occurred to me:

What will people do if they can not do a cash out refi? The BRRR model does not work without refi. You will most likely be able to get your loan converted to long term and/or get a loan for what you have in the house. For the business to continue we need a current market appraisal and 75 - 80% ltv.

I personally have 4 properties that would face this problem

1. Owner finance on a property that is due in 1 year. I have about 10k in reno and the house is worth significanly more than I owe.

2. I have renovated a house I own free and clear - Probally the most cash tied up in one place

3. 2 Hard money loans renovation loans due in January.

For me, and most people, to get to the next level I need current appriasals and cash out at 75% or I quickly run out of cash.

I expect they will come back at some point, but what if it takes 12 months to roll out?

Jay Hinrichs · Answer

well since I was a fairly large HML in 07 leading to the GFC and ALL my loans were to those who were BRRR or in those days we just called it rate and term refi.. I can tell you that half of my loans went bad and I ended up foreclosing on 200 plus investors who simply could not get a loan. investor loans froze for about 3 to 4 years..

Now I don't think this is going to happen this go around I think 6 months to 9 months will bring that product back.

but for the short term you may have to just bite the bullet there are plenty of lenders that will do these at 5 to 10 points and 8 to 10% interest for 5 to 10 years.. not optimum but better than a foreclosure.

Dan Schwartz · Answer

@Lesley Resnick have these loans been shut down? We are in the middle of two rare and term refis, which are progressing just fine, but put off our interest in cash out for the moment. Other than checking to see that the refis are on track, I’ve stepped away from following mortgage news to focus on triaging my other business. Or are you speculating about the unthinkable?

Thanks and good luck!

What will you if cash out REFI's don't come back this year?

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