Hard Money refi'd to conventional issues....

[George Moehlenhoff]

So on my first flip I got linked up with a mortgage broker. He put me in contact with a HML who's terms were 4 months before penalties started to be assessed. The mortgage broker said once the rehab is complete, we refi out of the HML and then retail the property... Sounded fine to me....

Now as I am about a month or so into the rehab, I am getting uneasy with this broker and want some advice.

First of all, once the rehab begins, he informs me after I refinance I would not be able to retail the house untill 4 months after the refi. He says I could list it, but if someone puts an offer in, have them prequalify through him and then let them live there paying rent untill the 4 months is up then close the sale? HUH? He swears this was discussed, which it NEVER was. He says if I sold it before the 4 months, I could be viewed as a "Loan Jumper". I had another topic on this, but I believe the common opinion was the broker would not get paid unless I kept the house for 4 months? Thoughts?

Now today, I get the good faith estimate to refi and it lists closing as being about $3999; he originally stated it would run 2500-3000. When I asked his employee why there was such a drastic increase, he said because the refi was only for 78,000. I explained the broker knew the details of my deal before he ever shot me a closing costs estimate.

I'm not happy with this situation at this point I still have 2.5 months before the hard money starts charging continuation fees etc....

I'm wondering if I should find another broker to refi with; will most brokers refinance a hard money loan into a conventional? Is that common practice for most lenders? (The HML will be owed 78,000; house will appraise for at least 115000.) Also, concerned if the hard money lender would take issue with me switching brokers as this broker introduced me to him. Do HML lenders care, or do they usually just want their money?

I know I've asked alot, all responses/advice appreciated.

[Jon Holdman]

If your plan is to sell this house, why in the world would you refi? That's going to cost you a ton of money - probably more than just paying interest to the HML for a few more months. I'd have never signed up for a four month loan, but given you're there, what are the penalties? Can you extend the loan a few more months?

Sounds like you want to refi based on the new appraisal. That's very tough with less than six months ownership. Even then, a year is better. Even if this broker says he can do it, I'm skeptical. I've been there, she couldn't.

The HML shouldn't care who does the new loan. I'm not too sure about this case, though, since it almost sounds like these two are working together to milk you.

Why are you a "month into this rehab"? Why isn't it "I'm done and its been listed?" You're in the peak selling season right now. If you list it, it will become impossible to refi. OTOH, it will take at least a month, maybe two, to do the refi. So by the time you finish the refi, you will have missed the best part of the year to sell.

I'd get this rehab finished up ASAP, negotiate with the HML to hold the loan until you get a buyer, and get this should as quick as you can.