Which lender allows cash out under 12 months

Question

Hi BP'ers,

So i purchased a duplex all cash and i went to my local lender at chase to get a ReFi and was told that they cant do it since my holding period is less than 12 months. Are there any alternative ways/lenders that you know that allows homeowners to pull out equity under a year of ownership, preferably at market value?

Thanks!

Andrew Postell · Answer

@Lenn Lin the answer here is that only lenders that are investor friendly will allow you to refinance in less than 6 months.  And yes, you can absolutely refinance in less than 6 months.  Others might stumble across this post so I'll address a couple of things for the others who might be here and then provide some solutions here as well.

Generally speaking there are 2 main types of loans for investors:  “Conventional” and “Portfolio”

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac (if you recognize those names).  These loans are all 30 year fixed rate loans.  They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans....but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending.  Fannie/Freddie money = Fannie/Freddie rules.  NOT the bank's own money.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money.  Sometimes referred to as "commercial" loans.  These loans are a lot more flexible than "conventional" loans.  Bank's money = Bank's rules.  If they like you, then maybe they will lend to you.  But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a shorter term.  The most common portfolio style loan in Texas is a 20 year adjustable rate loan.  These loans are easier to get but the terms are different.

So the conventional loans will have the "set restrictions" on refinance an all cash purchase but a portfolio loan may not.  Now, don't get me wrong - not all portfolio lenders will even lend to residential real estate.  But the ones that we work with usually don't have any waiting.  So how do you find those?  I wrote an entire post about it for Bigger Pockets you can find HERE.

But can you refinance with a conventional loan in less than 6 months?  Yes, absolutely!  I wrote an article about that subject that you can find HERE.

I hope that some of this makes sense but feel free to ask anything else if you need.  Thanks!

Nicole Galchutt · Answer

6mo. Your lender may have an additional overlay.  Here are the guidelines-

The property must have been purchased (or acquired) by the borrower at least six months prior to the disbursement date of the new mortgage loan except for the following:

• There is no waiting period if the lender documents that the borrower acquired the property through an inheritance or was legally awarded the property (divorce, separation, or dissolution of a domestic partnership).
• The delayed financing requirements are met. See Delayed Financing Exception.
• If the property was owned prior to closing by a limited liability corporation (LLC) that is majority-owned or controlled by the borrower(s), the time it was held by the LLC may be counted towards meeting the borrower’s six month ownership requirement. (In order to close the refinance transaction, ownership must be transferred out of the LLC and into the name of the individual borrower(s). See B2-2-01, General Borrower Eligibility Requirements for additional details.
• If the property was owned prior to closing by an inter vivos revocable trust, the time held by the trust may be counted towards meeting the borrower’s six month ownership requirement if the borrower is the primary beneficiary of the trust.

Andrew Postell · Answer

@Lenn Lin when we use that strategy we do buy the property in our personal name. The LLC acts as our "hard money lender". Hope that makes sense.

Shaun Weekes · Answer

If you bought the home all cash then there's a good chance you'll qualify for delayed financing.  Fannie Mae will refinance your property based on new value after day 1.

Get with a broker or loan officer that has experience in this area.

I hope this helps.

Forrest Hayashi · Answer

@Andrew Postell

Thanks Andrew, I see that you are referring to the LLC route.

Do I need to set up a bank account and tax ID for the LLC for this to work? I just recent set up a LLC and didn't do much with it so no bank account nor do I think I received a Tax ID yet. If a bank account is needed, do I need to deposit any require funds for this to work?

If signing a lien using an LLC, does that mean my deed would be under the LLC as well? As currently it's under my name.

Sorry for the many questions! Thank you!

Andrew Postell · Answer

@Lenn Lin if you read that last sentence in my post it will show you how to avoid that limitation as well.

Forrest Hayashi · Answer

Thanks Andrew! you're right many local banks do provide cash out on the six month and few credit unions allows under 6 but maximum of the take out are limited at the purchase price + the closing cost.

Forrest Hayashi · Answer

Thanks Shaun! I have reached out to couple of national and lcoal banks and unfortunately, most are strapped by the six month holding period and only allows take out of the purchase price + the closing close. :( its a shame.

Nicole Galchutt · Answer

You would get a new appraisal to determine current market value.

Forrest Hayashi · Answer

Thanks Nicole!

Are the borrowers allow to cash out at market value at the 6th month? or the purchase price?

Which lender allows cash out under 12 months

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