Help with understanding refinancing and going forward.

[Dalton O'Rourke]

Hello!

I am new to the real estate game and got my foot in the door by purchasing my first property as a live in renovation. It has been a very exciting and humbling experience. Im towards the end of my renovation and beginning to finalize my numbers...looking towards refinancing my loan with the new house value. 

I know this isn't a great deal, but this is where I am currently living and plan to until I can save up and do it all again!

Here are my rough numbers below. We purchased with a conventional loan, 10% down payment:

Purchase Price: $405,000

Closing/Fees/Misc: $12,500

Repairs: $85,000

ARV: $575,000

I was hoping for rates to come down some in the next year and refinance out with a 75-80% LTV. How do I properly calculate these numbers? What would you recommend I do in this situation?

Thank you all for your advice and expertise.

[Tim Delaney]

I'm not 100% sure if this is what you are asking, but if you put 10% down at purchase you probably still have about $360k on your mortgage. If you refi at 80% of $575k value then you can pull out about $460k. That will pay off the remaining $360 mortgage and reimburse your rehab and closing costs. That is assuming your DTI can cover the increased mortgage payment.

If you have use for that extra $100k that you would get back right now then don’t wait. Rates may drop, but they also may not. Don’t miss out on other investment opportunities to speculate on future rates.

[Brittany Minocchi]

Hi Dalton! 

Not sure when you purchased the property, but keep in mind conventional loans require 12 months of seasoning before you can use the appraised value for a cash out refi. Assuming you've met that, your original loan amount was ~$364,500 with 10% and a purchase price of $405k. If you cash out at the 80% LTV conventional max (assuming it's a single unit) and your new value is $575k, that makes your new loan amount $460k. That's enough to pay off the original loan and pull the $85k you had in rehab costs, with a little left over to cover your closing costs for the refi.

Do you have an immediate need for the ~$85k you'd be pulling? What is your current rate? How long do you plan to continue living in that property? There are a lot of variables....I will say I don't usually advise to wait for rates to come down. There's no guarantee that they will, and there's a cost to waiting.