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Updated 3 days ago on . Most recent reply
VA Loan Assumption - Adding Supplementary Financing and Minimize Cash OOP
Hello!
Question: What is the best method to finance a $60k-$100k gap after VA loan assumption? Goal is to minimize cash OOP.
Personal Background: I am a former oil/gas engineer, currently doing military work. I bought two (2) single-family homes in 2019 and sold them in 2023. I am a limited-partner in five (5) multifamily syndications.
Deal-Specific Information:
- VA loan assumption at 2.5% for $260,000
- Purchase Price $360,000. The property has been on the market for 4+ months and it sounds like the seller is more negotiable now.
- I have enough money in retirement accounts to fund the difference ($60k-$100k pending negotiations), but I would prefer to finance the difference to minimize cash OOP and avoid penalties for early withdrawal.
- Lender offered 30-year fixed financing at 8.5%, 90% LTV to cover the gap.
- At $100k spread between purchase and assumption, this means I would still be OOP $36k with $360k appraisal. If a lower purchase price were calculated, the LTV would be based off of the purchase price, not the appraisal. e.g. if the purchase price were negotiated down to $330k, I would be $33k OOP with a $37k supplementary loan.
Anything you could recommend would be most appreciated!
Jack
Most Popular Reply
Hi Jack, the 30 yr fixed rate at 8.5% seems high to me. A common option I see for people to bridge this gap is to collateralize another property and get a cash out loan, although rates depend on what your are purchasing the new property for (primary resi vs investment property). I would also look into getting a HELOC/refi if you have other real estate you wholly own.
Another thing to consider is the possibility of a portfolio loan on all your assets, but that might come with some extra complication depending how your interest in the syndications is structured.