Financing Strategy - Commercial/Conventional Combo

[Jeremy Mattson]

Hi All,

Looking for some advice/feasibility of a financing strategy I am looking to do on a house I am about to put an offer in on.

BACKGROUND

I have pre-approvals from both commercial and conventional loans. The commercial loan is a pretty cool option where the lender will lend 80% ARV @ 5%, 5 year fixed/20 year amortized (6-month interest only). I can get a conventional loan @ 4% amortized over 30. The property needs 35-40K in repairs/updates and I plan on living in the property while I do the renovations.

PROPOSED PLAN

My thought is, If I purchase the property using a commercial loan I will several benefits.

1. Rehab costs are rolled into my loan (don’t need to seek financing elsewhere)
2. Holding costs are decreased as its interest only during the rehab

Once the rehab is completed, instead of staying with the commercial loan, I refinance the rehabbed property with the conventional loan (as I still owner-occupy) which will

1. Lock me into a lower -fixed interest rate
2. Amortize the loan over 30 years
3. Cash flow…BOOM!!

Anyone see any issue with this?? You thoughts are greatly appreciated.