Hi! I'm very new to this all and have loved reading through the forums, I'm learning a ton. TIA for the guidance!
I've been learning about DSCRs, HELOCs, Heloans, Cash-out Refinancing, etc. lately and I just had the question come to mind: can you HELOC/Cash-out Refinance a DSCR loan?
My wife and I would like to buy a rental next year (most likely using a DSCR loan, to dodge the DTI requirement), but I'm not completely sure if that would get us stuck down the road. If our rehab/the appreciation of the next few years raises the property value to the point where we'd want to pull equity out of it to use toward a subsequent rental, would we be able to on a DSCR? If so, what would be the best way to go about doing that?
yes, you can generally refinance out of a DSCR loan and into a new loan. but there are pre-payment penalties in the first few years that incentivize you not to:
here's the thing, though - you generally wouldn't buy with a DSCR loan, rehab, and then refinance again; usually you'd refinance into a DSCR loan, and be done.
yes, you can generally refinance out of a DSCR loan and into a new loan. but there are pre-payment penalties in the first few years that incentivize you not to:
here's the thing, though - you generally wouldn't buy with a DSCR loan, rehab, and then refinance again; usually you'd refinance into a DSCR loan, and be done.
Awesome information about the penalties, thank you for sharing that.
I'm interested to hear—why do you say that you typically wouldn't buy with a DSCR loan? Would you recommend going for a conventional->rehab->refinance (DSCR) instead or something? Would love to hear what is best practice for something like this. Thanks!
@Liam Willder because If you purchase with a DSCR it is expected to be occupied by a renter, often by the time the loan closes or shortly thereafter. You can certainly get a dscr loan on a vacant property it will just be subject to a lower LTV. If you're interested in purchasing and adding value so you can pull out the equity I think you should look into hard money/construction loans. They can help you with acquisition and rehab. for a premium. Then you can refi the construction loan into a DSCR.
if it's a BRRRR or a flip, generally you would buy with cash or hard money.
then if it's a BRRRR, you'd refinance into a DSCR loan. if a property is distressed, you generally wouldn't buy it with either a conventional loan or a DSCR loan.