Lending on value not purchase price?

[Charles Kennedy]

Hey BP,

Will any banks or CUs give a loan based on value rather than purchase price? I may be able to acquire a property below market that I plan to house-hack and was wondering they'd lend on value? That was I'm cashing out before even putting money in?

Or do I have to do a regular loan and then wait 6 months/1 year to refinance and then pull equity out?

[Roy N.]

@Charles Kennedy

The only way we've managed that with a residential (1-4 unit) property is to buy it cash and then refinance.   If you are financing at time of purchase, lenders tend to underwrite to the lower of the appraised value or the purchase price (They like it when there is built-in equity).

Here in Canada, if there is a lot of baked-in equity that we want to access, and we must Close with financing, we have the option to choose an "open mortgage" (as opposed to "closed") where there are no penalties for retiring the loan early.  Then, in 45 - 60 days, we'd refinance the property (we do not have a hard-n-fast seasoning period).