Private lenders and refinancing

6 Replies

Hello everyone!

I purchased $186,000-SFH in Virginia using private lender a month ago. I have to pay the payable amount plus interest back in 3 months. Right now, I have been rehabbing the property. ARV is $400K. I want to refinance to take the some cash out and pay off the loan. However, couple mortgage companies told me that they would only loan me 70%-80% of the purchase price. Moreover, the financial agent said that most banks wouldn't lend money to any buyers in this situation, only cash buyers ( I was considering selling the house.) It has to be a year later.

I'm thinking of getting another private lender to pay the first loan. Have you guys heard of the WPI lender (Wholesale Properties International), which I found on the internet? They provide AVR loan, rehab loan, purchase loan, etc., but they require $4,000 deposit.  

Any insights would be most appreciated.

Thanks so much!

I do not know this company but i would never pay a deposit for a loan.  I might pay a small application fee (though I never have) and it is reasonable for the borrower to pay for appraisals, a survey (if needed), etc.   If you are paying for services you should either pay the service provider directly or make it clear that the payment you make to the broker is for those services.  What recourse do you have once you pay the $4K?  I suspect very little.

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I agree with Jeff, deposits for loans are usually a bad idea (we did it once and it eventually worked out, but we were desperate). Most banks won't lend on appraised value until a seasoning period of at least one year, and even then many won't do cash out. But, usually banks will lend 75-80% of your total cost. So you should be able to find a bank that will lend to you 75-80% of your purchase plus your rehab. That's what I would look for.

One other option is to go to your local banks. If the rehab is complete, they might be willing to lend to 70% of the ARV.

I'm assuming your rehab is completed, correct? If you're asking someone to lend 70% of the ARV and the rehab is not complete, then you need to find a hard money lender. No bank is going to do that otherwise.

Have you tried Recasa Financial? They're a hard money lender and they would do it if the rehab isn't complete. 

Just wondering. Why do you need out of this loan exactly? Is it because its a 3 month loan with no extensions? Or are you trying to lower the rate?

I strongly advise against paying any upfront fees for lenders.  Check out my blog linked through my profile. One of my first posts (actually maybe it was my first post) was dealing with this same issue.  The real lenders in your market go to the REIAs.  Start going to them and network and get to know them.  Maybe one of them will refinance you out if they think there's sufficient equity.  Then again, they're going to want to know why you're not just selling it.  Did you change your mind and now you want to keep the property as a rental?  They'll want to see sufficient cashflow.  Do you want to keep it as a primary?  Don't know a lender who would do that in today's lending climate.  Can you not sell the property?  They'll want to know why.  Lenders may be suspicious why you can't wait for the cash until you sell it.  Are you struggling with the expensive debt service? 

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Never pay an upfront fee to a lender, besides maybe an appraisal fee!

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