Questions About Financing All Cash Offer On Single Family Home

[Gil Happy]

Hello,

I have a question for any mortgage lenders / bankers out there related to financing. I was having a discussion with someone and I was telling them how I recently submitted 40k over list price an on a single family home that was listed at 800k.

Long story short, I lost to an all cash offer. Since the home has not closed yet (and I don't know the offer), for the sake of argument, let's assume it was a full price offer of 800 that was accepted.

I was saying what kind of person would pay 800k cash for a property when interest rates are so low, when instead you could put your money into the market, etc for a higher return than current mortgage rates. Here is what they explained that some of these cash offer are doing and I'm needing clarification if this is accurate and if it is possible:

- You can get a loan from your investment brokerage for up to 50% of your investments (not sure if this was IRA or traditional account). So let's say you had 1.6 million in your brokerage account, you could get a loan of 800k from your brokerage account at 5%; he's saying a 'bridge loan'

- Then the seller has accepted this 'all cash' offer. Once you close and move in to the new home, you refinance your home with a regular / traditional mortgage (I'm assuming 30 years) and then put the 800k back into your brokerage account. Does this make sense or even possible? When he says re-finance, it is actually a refinance, or is it called something else? Are these 'mortgages' at regular single family rates? Would the bank give you a 'mortgage' for 800k, or is it subject to appraisal?

Any comments are greatly appreciated!

Thanks

[Kevin Sobilo]

@Gil Happy, I am not sure about the bridge loan against someone's brokerage account. However, people buying homes in cash and then refinancing is common.

They may do it to negotiate a better deal because a cash offer isn't subject to the buyer getting a loan, the house/property qualifying for the loan, or the house appraising for the necessary amount.

When the cash buyer does refinance they will do another appraisal. If it appraises for the sale price, they can probably refinance out 80% of the $800k sale price or $640k.

However, they may do some kind of rehab on the property prior to refinance and bring the property up to $1 million in value. They would then be able to refinance out the will $800k purchase price.