Is a Cash Out Refinance the same thing as Delayed Financing?

Question

Hello,

It's been a while since I've posted and this may be a dumb question but I wanted some clarity on this topic.

I know a cash out refinance is a way to pull out built up equity in your home and I know that delayed financing is essentially the same thing but immediately after purchasing a house with cash but this is where I get confused.

Is delayed financing just when you perform a cash out refinance soon after paying cash for a home?

I've read some articles and forum posts and am still a little confused. Any information, stories, or links would be greatly appreciated.

Thanks!

Joe Splitrock · Answer

@Vincent Egan delayed financing you are paying cash and the property is free of liens. It can also be done within the first 6 months. For refinance, you are paying off an existing loan, and refinancing into a new loan. You generally need to wait 6 months for seasoning to do this. Others may be able to add more advantages and disadvantages. Not a dumb question.

David Kelly · Answer

Another note to add, delayed financing with fannie/freddie only allow you to get your purchase price plus closing costs.  You cannot get any more than that.  Also, if you plan to use delayed financing and you had recieved some of that cash to buy the home from a HELOC, or some sort of other loan that is not attached to the property, that has to be paid back first, and the remaining cash is then available to you.  This can all be done within the loan.  You need to source where the cash payment was from, which is why borrowed money from somewhere else will come to light.

for example:

50k cash

100k heloc funds used

bought the home for 150k plus 5k in closing costs - total of 155k

You would only be able to receive 55k cash back.  But the heloc would be paid off during the process as well.

Andrew Postell · Answer

@Vincent Egan yeah, ask away.  We're here to help.  Delayed Financing is a cash out loan but it's one that occurs in the first 6 months of owning a home that you purchased with cash.  This description is important because receiving cash out with Fannie/Freddie money in the first 6 months is not permitted...unless you purchased with cash.  And that is called "delayed financing".  So it's really a specific form of cash out refinancing.  I wrote an entire post on it for Bigger Pockets (and how to avoid it) that you can find HERE. Thanks!

Is a Cash Out Refinance the same thing as Delayed Financing?

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