Question 2) Am I able to do a cash out refinance after 6 months similar to how I normally complete my transactions?
Short answer, absolutely! Smart investment answer, why would you?
When purchasing an investment property (aka investment purchase loan) you can put as little as 15% down allowing you to financing up to 85% Loan To Value (LTV).
When refinancing an investment property without cashing out (aka no cash out refinance loan) and to only lower your current term or payment then you are able to finance up to 80% of the value of the property, or 80% LTV.
When refinancing an investment property and cashing out (aka cash out refinance loan) a portion of the equity (receiving cash back at closing), then you are able to finance up to 75% of the value of the property, or 75% LTV.
If you buy this investment property with initial Conventional financing and put 20% down and pay for closing costs, you will have a mortgage loan on your new investment property for $120,000 (20% down of $150,000 = $30,000). If you then wish to cash out your equity, simply wait 6 months (Fannie Mae and Freddie Mac requirement) and you are eligible for a loan up to 75% LTV. Assuming your investment property’s appraised value is still $205,000, your new loan amount could be up to $153,750 repaying your loan of $120,000 allowing you to walk away from closing with $33,750 minus closing costs.
But it’s important to ask, is it worth paying two sets of Conventional (lending) closing costs and going through two loan transactions to simply get your down payment monies back? For some the answer is yes as they can now rinse and repeat the process of acquiring more properties while conserving their capital. For others the answer is no as they do not find value in paying double closing costs to get their initial investment back, the cash on cash return simply does not align with their overall investment strategies. The clear and right answer for you can only be answered by you as each answer is dependent on both the transaction and the investors overall investment strategy on a case-by-case basis.
If this sounds confusing, we understand, it’s exactly why the experienced team at Blink Lending Investments is here, to help answer these questions and walk you through the process.
