How soon can I use money from refi cash-out for a down payment?

Question

Hello everyone.

A few months ago I bought a house cash. I was able to rent it out and just finished cashout refinance with an LTV of 75%. Can I use that money for a down payment for another house right away?

Will the new lender let me do that? Would they object to me using borrowed money for a down payment on the house I plan to get? Or do I have to wait for two months so that my last two bank statements do not show the deposit of the money I just borrow (from the cashout refinance)?

Thank you in advance!

Stephanie Medellin · Answer

You can use it right away.  It's perfectly fine to use funds borrowed against another property as a down payment.  Now if you just cashed out from your primary residence and want to buy a new primary residence, that will be a problem, but it sounds like this is a rental.

Nick Belsky · Answer

@Dan Marl

You could literally walk into the next room after closing on the refi and put it down on another place.  There is no seasoning when you have a settlement statement or HUD to source the funds (if they'd even ask).

Cheers!

Jake Wiley · Answer

Dan, it depends on the lender.    In order to have confidence they can sell the loan, some brokers have a very strict underwriting policy that is a paint by numbers program and one of the boxes might be two months of cash in a bank account, whereas the reality is that they are using the two months as a proxy to provide some sort of comfort around the money is actually your money vs. another loan.

When you have a cash-out refi, you can show the chain of events and where the cash came from and many will be able to work with that.    Talk to your lender.   Additionally, there are some lenders that advertise that they work with the BRRR strategy, so this wouldn't be a surprise or new for them.

Todd Rasmussen · Answer

Immediately. You will have to source the funds for the lender if there is a big incoming wire in the statements they review, but it's a pretty straightforward process of showing them the statement from the title company.

Terri Wyzkoski · Answer

Dan,

If you've already refinanced your property and have the cash-in-hand, no one can really tell you what to do with it.  The only way you might be affected is if your current lender has language in their loan agreement that has specific liquidity, debt, or other covenants.

Do you have a conventional loan, commercial real estate investment loan, or some other type of loan?

Richard Loniewski · Answer

If you have that money in your account most lenders should be fine with that.

How soon can I use money from refi cash-out for a down payment?

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