Financing, Refinancing, and Hard Money Loans

[Kayla Holbert]

I've just been introduced to financing through a mortgage loan, refinancing, and hard money lending. To my knowledge, the general approach is to get a hard money loan on a fixer upper, then refinance that property through a bank to pay off the hard money loan.. Is this correct? I've been hearing refinancing gives you your money back but I can't seem to understand how, considering you are paying not only points, but interest on that OG hard money loan.

[Timothy Maloney]

@Kayla Holbert Here's an example of our typical BRRRRR borrower: They buy the fixer upper for 100k. We loan them 90% of purchase price and 100% of the 50k rehab. They now have a loan amount of 140k. 2 months later the rehab is done and the property now appraises at 220k. Either we refinance them into a 30 year or they may elect to use a local lender or credit union. We refinance many of these since we (and most HML PML) don't have a seasoning requirement. So we refinance them at 70% of the new value and give them a loan of 154k. They often pay 0 or just 1 point at closing on the 30 year so they "walk away" with 10k - which was the original down payment. Fix and flip loans typically have points of 1-4 with rates in 7.99 to 11.99 while 30 years have 0-1 points rates 5-8. I hope that helps.