How to Obtain a Mortgage on Recently Rehabbed property?

[Brent Tomczak]

Hello All,

Scenario:

-I obtain a hard money financing for a property under contract.

-Example property X: paid $40k, rehab $20-25k, worth $105k

-Instead of flipping the property, I decide to keep the property as a rental

-Need to refinance the property out of the hard money loan.

Can I go to a bank, and obtain a mortgage for this property, without having to put a down payment due to large equity position? What is the best way to accomplish this? Will there be a lot of obstacles? PMI? What is the logical way to go about obtaining financing for this property as a rental going forward? I would assume a bank would check to see if any liens are on the property?

Thanks for the help!

[Jeff Copeland]

If the home is now worth $105k (and in fact appraises for that amount), you can do a cash-out refinance for 75% of that amount ($78,750). 

At the closing, the title company/attorney/closing agent will pay off your hard money loan and any other liens to ensure they have the first position note on the property. 

So if you have a hard money loan for $60k, you walk out of the closing with a check (or a wire) for $18,750, less closing costs and pro-rated interest payments.

There is generally no "down payment" on a refinance in the sense you're referring to. The 75% LTV takes care of that.

In other words, on a purchase, you'd need put 25% down on an investment property. Whereas, on a refi, you can take 75% out. Same numbers, but no cash out of pocket on a refi.

No PMI since you'd be at below 80% LTV.