Hard money refinance

[Nick Maugeri]

If I use a hard money lender to purchase a home, will a bank refinance or finance the home with a lein on the property by the lender?

[David Weintraub]

Yes, on avg banks will give you up to 70-75% of the value of the property, except many will want to see "seasoning", which is a time period you've held property.  That could be anywhere from 3-6 months, maybe more.

Easiest example:

Property sells for $100,000

Rehab: $50,000

ARV: $200,000

Lender makes you put down 20% of purchase, so you're in $20,000. Lender giving you 65% of ARV, which is $130,000 ($80,000 purchase / $50,000 rehab).

Once complete, property worth $200,000.  Bank hopefully gives you 75% of current value, which is $150,000.  That should take you out of the hard money loan, and leave with you with a few thousand left over, after you calculate closings costs (points, fees, insurances, holding costs).

Outside of traditional banks, there are lenders who will also give you 65-80% of final value, with lower credit scores, and without Debt-to-Income (DTI) concerns.