Looking to refinance in 6 months on a recent duplex

[Keegan Uderitz]

Hello BP!

Recently went under contract on my first property! It is a duplex in Racine WI. I made the purchase with a hard money lender who will help me with the rehab costs and I want to refinance and pull all my money out in 6 months (thats the goal anyway). I was wondering if anyone know what LTV to expect? I have heard 70% and I have heard 80%, this will be the difference between me walking away with no money left in deal or not. Obviously it still depends on the appraisal and if my rehab budget is accurate, but it would help to know what LTV to aim for as I might be able to boost up the rehab a bit more if the requirement is 80%.

Thank you so much for your answers! Looking forward to closing later this month!'

Also, happy to take any referrals for lenders who can get me 80-80+% LTV

Be great!

[Jon Kelly]

Quote from @Andrew Postell:

@Keegan Uderitz congrats on taking down a property.  I need to provide a bit of clarification here.  If this is an investment property duplex then the cash out limit with a conventional loan is 70%.  That's the maximum that Fannie Mae or Freddie Mac (if you recognize those names) will allow.  Your Hard Money Lender should have requested that you be "PreQualified" on the REFINANCE step here...but maybe they didn't? Highly encouraged to get prequalified before we take down a property to know exactly what our "Loan to Value" (LTV) will be BEFORE we take down a property.  That way we know how much we need to leave in a deal or maybe even offer less because of how much we are prequalified for.  

Generally speaking there are 2 main types of loans for investors: “Conventional” and “Portfolio”

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac. These loans are all 30 year fixed rate loans. They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans....but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending. Fannie/Freddie money = Fannie/Freddie rules. NOT the bank's own money.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. Sometimes referred as "bank statement" loans. Sometimes referred as "DSCR" loan. Whatever they want to call them I want you to think about these loans as loans that come from the lender themselves. These loans are a lot more flexible than "conventional" loans. Bank's money = Bank's rules. If they like you, then maybe they will lend to you. But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a shorter term. The most common portfolio style loan in Texas is a 20 year adjustable rate loan. These loans are easier to get but the terms are different.

Is it possible to get an 80% cash out loan on a duplex with a portfolio loan?  In theory, yes.  But I might caution that 75% might be the highest that might be possible.  And just expect the terms to be a little different as described above.

Anyway, I hope all of this makes sense but feel free to post anything else that you may need.  Thanks!

You should copy/paste this into every forum post that asks the difference between conventional / portfolio lending. I see that question asked all the time. You described it very well!