Investor · Fort Worth, TX · Member since 2016 · 72 posts · 25 votes
I am reading Brando Turner's book, Rental Property Investing, pg 69, Refinance. I guess in this example the $105,000 that he has in the house must have been in cash? Now he's refinancing it based on the Value of $150,000 with a 70% LTV to get $105,000 back and then reinvesting $105,000. Anyone, please explain. I don't get it.
Also, how do I determine the amount that a lender will refinance a rental property? For example, I have a rental property that is valued at $150,000. I have a mortgage of $75,000. How much would a lender refinance the house based on the 70% LTV rule for me to get money out to reinvest and how much money would I get out of this?
Is the calculation 150,000 x 70% = $105,000. Is this what the bank will loan me on top of the $75,000 mortgage? Or am I supposed to subtract $105,000 - $75000 = $30,000 which is what the bank will loan me. This would make my new loan $105,000 versus $75,000 which I would use the $30,000 to purchase a new rental. Is this correct. Please provide feedback.
If you have $105k in a property either via a loan or your own cash and the property is worth $150k and the bank will refinance at a 70% LTV, then you can get a refinance loan in the amount of $105k.
The bank will do an appraisal to determine how much they will lend (i.e. 70% of the appraised value).
If you have a $75k mortgage and it's worth $150k and the bank will refi at 70% of ARV, then you will get a loan in the amount of $105k, which will pay off the $75k mortgage and leave $30k in your pocket to use as you choose.