Anatomy of a refi in BRRRR
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Lender · Springfield, MO · Member since 2023 · 6 posts · 14 votes
2y
@Lee Korak Hey there! If you're considering refinancing with DSCR, it's important to keep two key things in mind: loan payoff and ARV. Here's an example to help explain things better. Let's say your property's ARV is $100,000 and the loan payoff is $54,000. If your LTV is around 70%, your new loan amount will be $70,000. Out of this amount, $54,000 will go towards the loan payoff, leaving you with $16,000. This remaining amount will cover the loan costs and third-party fees like title, escrow, and insurance. So, you could potentially get a cash-out of about $9-11k.
While John is correct about the time period of 3-6 months for 70% LTV and 6+ months for 75% LTV, it is worth noting that this can vary depending on the lender. There are some lending programs available that can offer up to 80% LTV on cash out with no seasoning requirement if the property has been rehabbed. Hope this helps!
Don't hesitate to connect, I would love to share more info with you!
6 Replies
- 3yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Lee Korak:
So I'm unclear on how a refi would work exactly on a property with a loan on it. Here is a somewhat real-life scenario to see if I am thinking about this right:
Let's say I have a rental property that I purchase for $65k. I put $13k down, plus $3k in earnest/due diligence, bringing the money down to $16k total. So the loan is for $54k.
I then put $25k of rehab into the house and it then appraises for $100k. If I do a cash out refi after a year (not factoring in right now the amount I've paid down with a year of mortgage payments), how much actual cash can I pull out?
So if cash-out refi is 70% LTV, and the value is $100k, with an original loan of $54k am I looking at being able to pull $70k out (70% of $100k)? Or is it $70k minus the $54k of the loan, equaling $16k? Or is it some combination of this?
@Lee Korak Assuming 100k market value, and going up to 70% loan to value your new loan would be 70k. You would net in cash the difference from 70k-54k minus any closing costs. so, just assuming 3k in closing costs you would walk away with 13k.
Just FYI, you should be able to go up to 75% so that would add 5% or 5k in your example to your cash.
Hurst Real Estate, INC4.989 Reviews - Member since 2023 · 16 posts · 10 votes3y
Quote from @Jay Hurst:
Quote from @Lee Korak:
So I'm unclear on how a refi would work exactly on a property with a loan on it. Here is a somewhat real-life scenario to see if I am thinking about this right:
Let's say I have a rental property that I purchase for $65k. I put $13k down, plus $3k in earnest/due diligence, bringing the money down to $16k total. So the loan is for $54k.
I then put $25k of rehab into the house and it then appraises for $100k. If I do a cash out refi after a year (not factoring in right now the amount I've paid down with a year of mortgage payments), how much actual cash can I pull out?
So if cash-out refi is 70% LTV, and the value is $100k, with an original loan of $54k am I looking at being able to pull $70k out (70% of $100k)? Or is it $70k minus the $54k of the loan, equaling $16k? Or is it some combination of this?
@Lee Korak Assuming 100k market value, and going up to 70% loan to value your new loan would be 70k. You would net in cash the difference from 70k-54k minus any closing costs. so, just assuming 3k in closing costs you would walk away with 13k.
Just FYI, you should be able to go up to 75% so that would add 5% or 5k in your example to your cash.
Ok. Thank you!
- Lender · Houston, TX · Member since 2023 · 235 posts · 255 votes3y
@Lee Korak Depending on when you purchased the property it would be either 70 or 75% LTV. 3-6 months for 70% and 6+ months for 75%.
At a $100K value, the new loan amount would be $70K. The new loan amount will pay off our existing debt outstanding of $54K. Then you'll have to pay for closing costs, escrow, title fees, and etc for the new loan amount.
- Lender · Springfield, MO · Member since 2023 · 6 posts · 14 votes2y
@Lee Korak Hey there! If you're considering refinancing with DSCR, it's important to keep two key things in mind: loan payoff and ARV. Here's an example to help explain things better. Let's say your property's ARV is $100,000 and the loan payoff is $54,000. If your LTV is around 70%, your new loan amount will be $70,000. Out of this amount, $54,000 will go towards the loan payoff, leaving you with $16,000. This remaining amount will cover the loan costs and third-party fees like title, escrow, and insurance. So, you could potentially get a cash-out of about $9-11k.
While John is correct about the time period of 3-6 months for 70% LTV and 6+ months for 75% LTV, it is worth noting that this can vary depending on the lender. There are some lending programs available that can offer up to 80% LTV on cash out with no seasoning requirement if the property has been rehabbed. Hope this helps!Don't hesitate to connect, I would love to share more info with you!
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