After a cash purchase, how soon can I cash out refinance equity?

Question

Jerry Padilla · Answer

Account Closed

A cash-out refinance within 6 months of a purchase transaction when no financing was obtained for the purchase transaction are allowed under the following parameter;

• The new loan amount is not more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV).
• After the 6 month mark there is no restriction to purchase price and closing costs. 
• On a primary residence you can pull out up to 80% LTV on a SFR and up to 75% LTV on 2-4 unit multi-families.

Andrew Postell · Answer

Account Closed if you are seeking a "conforming, conventional" loan (meaning Fannie Mae and Freddie Mac) there are all sorts of rules that have been referenced in this post.  Fannie/Freddie usually have the best rates and terms but have a lot of rules to them.  I wrote an article for Bigger Pockets on the proper way to buy a home with cash HERE. The first 2 sections are about the restrictions behind the rules but section 3 is about the proper method.

Now, if you are seeking a non-Fannie/Freddie loan (portfolio or commercial for example) then the rules could vary widely. Since those loans are governed by the bank itself, the bank will call the shots on lending their own money. So you could absolutely find a loan that can provide you cash back without all of those Fannie/Freddie rules....but the rate might be higher, or it might be adjustable, or maybe only a 15 year mortgage.  Pros and Cons to everything I guess but read that article if you want to know how to do it.

Feel free to tag me with any other questions.  Thanks!

ROB GRIFFIN · Answer

Hi Mischa, this question is really too vague to answer.  There is much more information that is needed in order to answer this question properly.  First, it depends on you as a borrower.  What type of credit do you have, what bank are you working with, is the property renovated or in need of renovation.  Here are some thoughts that might help you.

Is the property renovated or in need of renovation.  Most banks will want the property to be completed before doing a cash out refi.

How is your credit? This will be a big factor in getting a cash out refi

What bank are you working with.  In my experience, it is easier to work with a local bank on a cash out investor loan.

Help this helps.

Account Closed · Answer

Hello,

Thank you @Rob Griffin for pointing out a few things that I had on the back of my mind and was probably going to post another question for. One of them being the condition of the home when attempting to cash out. It's appearant that ideally you want repairs completed if it needed any work. At the very least the financing options would be greater. After many conversations and a little digging I've made it a must to start dealing with a local credit union. If credit worthy they will provide same services as a big institution but with rates and attention that is unmatched.

@Dave Bhat, the reason why I posted the question is because I have read here and there that you indeed are able to do a cash out refinance. That is if the house is owned free and clear along with being purchased with 100% non-financed cash. I will PM you so you can tell me a bit more on how you are getting it done.

Thank you everyone!

Mischa Vallegotti

Mark Stillman · Answer

If you purchased with all cash and your property only has minor repairs that would not be an issue in the appraisal report you can get a Delayed Financing mortgage through Fannie Mae and technically cash out the day after closing instead of waiting six months . Realistically though, you are looking at over 30 days after the purchase closed because the bank will want the closing paperwork of the purchase.

Anthony Rea · Answer

Ok, So I'm new to bigger pockets and new to 2nd home purchasing.  My situation and questions are these.  I have Horrible credit (580) and just finished going through a long ( 2 year long) home loan modification, witch was finally approved and finalized.  Last year I came into some money and decided to buy a fixer upper in the State of PA, since I live in NYC I saw prices in that state were really low.  I purchased cash a small 2 bedroom bungalow in Dingmans Ferry PA for 13,500 cash.  no property in the neighborhood is selling for less than 60 and they're as high as 200,000.  I closed in November of 2016.  From my understanding I can borrow 70 percent of 13,500 if its before 6 months, but if it's after I can borrow more (depending on appraised value of course).  Should I seek a HELOC after 6 months a refi.  I'd Like to cash out about 30 to 40K witch after repairs I believe it's worth it.  I feel I can purchase another property cash again and flip the next one as I plan on keeping this one.  Would I qualify, in other words will banks even touch me with a 10 foot pole (dismissed bankrupsy, Collections, chargeoffs)  Or should I (hear me out here) Sell this property (wink wink) to a well qualified person of my choosing, and use the proceeds of the sale to flip my next property while paying off my *sale* house.   Or would closing cost kill any future proceeds?  Or just stick my head in the sand and be happy with my purchase already  (BTW, my first mortgage is a 1 bedrooom condo in Queens that was under water when I first started my mod. but has since balloned to bing +50,000 in equity with rising home prices.  Again any information would be helpful.

Neil Timmons · Answer

Rob,

I have been seeking the same answer, but I am curious with some specific variables.

How quickly can you refi a cash property in rentable condition with renters, by someone with excellent credit?

This may mean the property is owned for duration of the rehab, but once that is done do we still have to wait the whole year to refi?

Neil

After a cash purchase, how soon can I cash out refinance equity?

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