Bank Loan Options for Investment Prop Refinance w/ Cash Out

[Carlos Goulart]

Hello BiggerPockets community.

I'm looking to refinance a 2- Family (non-owner occupied) investment property with a cash out option to help finance another future investment property. Is 70% LTV a standard or are there banks willing to go higher, like 80%+ for example. Would it be better to find an online lender or will I have better luck with a local lender (I live in MA)? I got one quote back so far from Rocket with a rate of 4.99% and closing fees of $8.8k. This seemed quite high. Is this the average I should expect or should I keep looking for something better?

I appreciate everyone’s time a look forward to hearing people’s thoughts.

[Chris Mason]

Originally posted by @Carlos Goulart:

Hello BiggerPockets community.

I'm looking to refinance a 2- Family (non-owner occupied) investment property with a cash out option to help finance another future investment property. Is 70% LTV a standard or are there banks willing to go higher, like 80%+ for example. Would it be better to find an online lender or will I have better luck with a local lender (I live in MA)? I got one quote back so far from Rocket with a rate of 4.99% and closing fees of $8.8k. This seemed quite high. Is this the average I should expect or should I keep looking for something better?

I appreciate everyone’s time a look forward to hearing people’s thoughts.

70% is the max CLTV particular to what you just described from both Fannie and Freddie. There are loan programs that will go higher, but without that Fannie/Freddie subsidy on the back end all profits must come from you the borrower directly, which will mean some combination of worse rates/fees/terms... no one lends money at 3.75% or 5.375% without some back-end or side source of revenue or revenue potential, just like you're not going to lend me money at 5% (your base CoC ROI = 5%) unless there's some other side hustle or back end thing in it for you, between inflation and opportunity cost you'd just be throwing money away to do so. No different here; if you want Fannie subsidizing your loan on the back end so that you get a good rate, you gotta play by her rules.

Big Red might be the right home for this loan, but if it is then it won't be by calling them directly through their retail 1-800 channel. In addition to the above, BR has one of the largest marketing budgets in the country, and this isn't free. That's what most of that $8k is paying for. You can cut out having to subsidize the marketing by going to an independent mortgage broker who will be pulling their wholesale rates. When someone with reasonable credit calls me for a 2nd opinion after calling BR, usually the rate ends up being very similar (a pinch lower today, a bit higher tomorrow, whatever), but all the thousands and thousands of dollars in (cleverly renamed) marketing fees go away (THIS is where the action is), holding all else constant.