Worst time to refinance?

[Xavier A. Malave]

Good evening,

We are currently trying to refinance out of our private loan and everyone that we have talk is saying that we need to bring money instead of getting our money out. I wasn't expecting this at all. Are we doing something wrong with the BRRRR? Or is only the market? Can I do something different or talk to someone else?

Thanks in anticipation for all the help!

[Randall Alan]

Quote from @Xavier A. Malave:

Good evening,

We are currently trying to refinance out of our private loan and everyone that we have talk is saying that we need to bring money instead of getting our money out. I wasn't expecting this at all. Are we doing something wrong with the BRRRR? Or is only the market? Can I do something different or talk to someone else?

Thanks in anticipation for all the help!

@Xavier A. Malave

 Not quite enough detail to fully understand…. But ultimately you have to leave about 20-25% equity in the property.  For a traditional loan you can bring this equity in cash but usually for a refi you can use the equity in the property (usually).  Some lenders are finicky /difficult about how they evaluate the new value on a recently purchased property.  If within 6 months of purchase one of our lenders insists on going with the ORIGINAL appraisal… totally defeating the rehab improvement value made to the property.

With that said, lenders will definitely flex their loan ‘buy criteria’ based on how much risk they perceive in the market in general, as well as various types of deals.  Cash out products are perceived as much riskier than non-cash outs, thus the reason for the higher interest rates on cash out refi loans. When the market is really turbulent some banks just won’t write them at all.  

Have you done any sort of new appraisal on the property to show them the value add to the property?  Most lenders will loan 70-80% of the appraised value (less any amounts owed on existing loans).

I would try reaching out to smaller community banks in your area. The bigger banks like Bank of America and PNC and Wells Fargo, etc. are definitely not as easy to work with on those types of loans. As a back up plan, you can also talk to the commercial lending side of the bank. They are often more able to have flexibility with that type of loan. We have done a cash out refi where we combined five properties into one loan just as an example.

Hope it helps!

Randy