BRRRR: Refinance From 203K Loan - LTV 90% Cash-Out Refi Inquiry

[William Kwong]

Hi BP,

Question for you BRRR loving people - My renovation on my first house-hack for my multi will be completed in the upcoming months. I used a 203K loan to fund the renovation.

$454,000 - Purchase Price

$124,000 - Renovation (Gut Job)

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$578,000 - Current Mortgage

Based on my analysis (not an expert) but my ARV is looking around 700K (praying for more) once it's finished and I plan on refinancing my loan into a Conventional to get rid of PMI.

However, with 700K I'll be a few percentages shy of 20% equity. - I've spoken with mortgage companies who are willing to do 10% down Conventional loans where I would just pay PMI until I hit 20% and call to tell them to stop charging me for it.

So here's the math, if I am able to refi and get a new loan at 90% LTV of $700,000. (.90 x 700K) = $630,000.

I will then use that $630,000 to pay off Loan Number 1 of $578,000. 

[Looks like my new mortgage payments would be similar as my current from using mortgage calc. with pmi.]

My excess cash is $52,000. This would essentially be my cash out refi. I would have to pay PMI for the next 5 years but at least my renters are paying for it.

But is my math correct???? Is there a catch with these mortgage deals, am I allowed to take that much cash out? Do I have to pay tax on the cash-out refi? I'm not very familiar with 10% conventional loans nor have I come across people doing this on BP refinancing less than 20% so I just want to pick your brains to see if my head is in the right place and my math is on par. Thanks in advance guys!

Best,

Bill