Paying cash and then refinancing into 30 years fixed. Possible? Pros/cons?

[Sartaj G.]

Hi all,

I am new to RE investing and recently bought a few SFHs from the same builder. I realized that builder gave many more incentives when I paid cash vs when I used an outside lender (builder’s price with their lender was much higher). I was wondering if I am in this situation again, can I pay cash (I have the liquidity) and then refinance after closing? My RE agent said it will not be possible but I have seen people mentioning this on the forum. If it is possible then what will be the pros and cons. I think there will be some additional cost to do refi and reissue of title policy.  How much that should run? Any other thing I am missing? 

[AJ Wong]

Hello, you'll want to be aware of any lender seasoning requirements. Some lenders want the property to be owned for a minimum of 6-12 months in order to 'cash out' refinance, particularly to use a new appraised value. However, if you pay all cash, some lenders will allow you to do a cash out refinance based off of the purchase price immediately after closing with no seasoning requirements. Alternatively you could explore a fully pre approved loan commitment to present to the developer and likely still negotiate aggressively. We have some great options for both if you need a second opinion. Good luck!  

[Jay Hurst]

Quote from @Sartaj G.:

Hi all,

I am new to RE investing and recently bought a few SFHs from the same builder. I realized that builder gave many more incentives when I paid cash vs when I used an outside lender (builder’s price with their lender was much higher). I was wondering if I am in this situation again, can I pay cash (I have the liquidity) and then refinance after closing? My RE agent said it will not be possible but I have seen people mentioning this on the forum. If it is possible then what will be the pros and cons. I think there will be some additional cost to do refi and reissue of title policy.  How much that should run? Any other thing I am missing? 

 @Sartaj G.  yes, you can. It is called delayed financing. We do it often. You will just be capped at the price you paid for the property as your loan amount (which is not typically an issue unless you are buying well below market value.) so, if you can truly get a better deal on the property by paying cash it can make perfect sense. (and do not listen the average agent on financing options!) 

[Sartaj G.]

Quote from @Jay Hurst:

Quote from @Sartaj G.:

Hi all,

I am new to RE investing and recently bought a few SFHs from the same builder. I realized that builder gave many more incentives when I paid cash vs when I used an outside lender (builder’s price with their lender was much higher). I was wondering if I am in this situation again, can I pay cash (I have the liquidity) and then refinance after closing? My RE agent said it will not be possible but I have seen people mentioning this on the forum. If it is possible then what will be the pros and cons. I think there will be some additional cost to do refi and reissue of title policy.  How much that should run? Any other thing I am missing? 

 @Sartaj G.  yes, you can. It is called delayed financing. We do it often. You will just be capped at the price you paid for the property as your loan amount (which is not typically an issue unless you are buying well below market value.) so, if you can truly get a better deal on the property by paying cash it can make perfect sense. (and do not listen the average agent on financing options!) 

@Jay Hurst
Thanks a lot for your response. I need to check delayed financing with my mortgage lender next time. What additional costs will be involved in doing delayed financing. I am assuming additional title policy cost to provide lender policy, closing cost by title company (again). Rest should be the typical costs for closing with mortgage. I am wondering how many additional $$ it will end up to figure out when will it mane sense.

[Jay Hurst]

with all due respect, your lender should have already been able to answer all the above if he or she know what they are doing. 

[Sartaj G.]

Quote from @Jay Hurst:

with all due respect, your lender should have already been able to answer all the above if he or she know what they are doing. 

@Jay Hurst
These questions came after I analyzed the closing documents for my two recent purchases, one cash and one with mortgage. I wanted to have a strategy if/when I plan to buy the next house. I did not went back to the lender to ask these questions. I thought the group here can provide an unbiased answer and might give me a top or two along the way.  

[Brandon Croucier]

We can do what is referred to as a Delayed Finance.

Let's connect.

[Erik Estrada]

Quote from @Sartaj G.:

Hi all,

I am new to RE investing and recently bought a few SFHs from the same builder. I realized that builder gave many more incentives when I paid cash vs when I used an outside lender (builder’s price with their lender was much higher). I was wondering if I am in this situation again, can I pay cash (I have the liquidity) and then refinance after closing? My RE agent said it will not be possible but I have seen people mentioning this on the forum. If it is possible then what will be the pros and cons. I think there will be some additional cost to do refi and reissue of title policy.  How much that should run? Any other thing I am missing? 

 Yes you can refinance after closing with a cash purchase. This is called Delayed Finance and there is no seasoning requirement for it. Do not get lending advice from a RE agent. Make sure you present the scenario to a mortgage broker or a local bank 

[Brittany Minocchi]

Yes, that's delayed financing. This is why lenders and RE agents should onnly advise on what they specialize in - many agents don't fully understand the financing programs that are available. Many investors who want a leg up over other offers will do this. They come in with a cash offer that will look better than offers with financing contingencies, and can close quicker.