Creative Refinance situation questions

Creative Refinance situation questions

Real Estate Agent · Portland, ME · Member since 2023 · 11 posts · 7 votes

Hey everybody, I'm planning on doing a creative acquisition strategy and I'm looking for some answers to these questions before I talk to lenders so I can adjust anything. 

Questions: 

1. Can you do a conventional Cash out refinance to a person and 2 LLC's?

2. If you can’t, can you do the cash out refinance in the personal name and then do a quit claim deed afterward to add in the other two LLCs? which leads to the next question 

3. Do you need to be on the title and the mortgage to do a DSCR cash out refinance or can you just be on title and get the person on the mortgage to agree to do the dscr cashout refi as well as taking the themselves off (they dont want anything to do with the property) so it's just the 2 LLC's on the new dscr mortgage and title?

4. Is there a seasoning period between a conventional cash out refinance and a DSCR cash out refinance?

5. Is there a seasoning period between the quitclaim deed of adding the 2 llcs and doing a DSCR cashout refinance? Like does the LLCs need to be owners for a certain period of time before DSCR refinancing.

Obviously I'm going to make sure its all pre approved before tackling this project but I was just curious on if I can get some insights here before I get started so I can make any alterations. Thank you guys, please ask questions if you want to get more information. 

Thanks

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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 679 votes
    2y
    Quote from @Alan Thach:

    Hey everybody, I'm planning on doing a creative acquisition strategy and I'm looking for some answers to these questions before I talk to lenders so I can adjust anything. 

    Questions: 

    1. Can you do a conventional Cash out refinance to a person and 2 LLC's?

    2. If you can’t, can you do the cash out refinance in the personal name and then do a quit claim deed afterward to add in the other two LLCs? which leads to the next question 

    3. Do you need to be on the title and the mortgage to do a DSCR cash out refinance or can you just be on title and get the person on the mortgage to agree to do the dscr cashout refi as well as taking the themselves off (they dont want anything to do with the property) so it's just the 2 LLC's on the new dscr mortgage and title?

    4. Is there a seasoning period between a conventional cash out refinance and a DSCR cash out refinance?

    5. Is there a seasoning period between the quitclaim deed of adding the 2 llcs and doing a DSCR cashout refinance? Like does the LLCs need to be owners for a certain period of time before DSCR refinancing.

    Obviously I'm going to make sure its all pre approved before tackling this project but I was just curious on if I can get some insights here before I get started so I can make any alterations. Thank you guys, please ask questions if you want to get more information. 

    Thanks


    Hey Alan, Local New Englander and DSCR broker here...

    1. Conventional will not allow you to close under the LLC, just the individual name

    2 and 3 - You can do a DSCR cash out refinance and close under the business name with anyone that is on the LLC. I've closed scenarios like yours where person A is on the note and person B is only on title and they switch but both are on the LLC - That is OK. You would just make sure whomever it is you want to credit qualify has majority share ownership of the LLC for the time being of the underwrite. Typically, lenders will want to see 75% ownership for qualifying guarantor.

    4 - There are 3 and 6 month cash out refi seasoning requirements for DSCR cash outs. Three months typically will reduce cash out max leverage to 70ltv, unless lender allows it and you pay more in points. More common route is the 6 month purchase seasoning where you can get the full 75% cash out leverage at no additional charge. Conventional is 12 months.

    5 - Simple here, no. But you can avoid this thought and approach all around by just going DSCR and doing a simple LLC cash out refi with the proper ownership % in place before the loan is registered.

    Happy to connect for more details. Good questions! Best of luck!

  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Alan Thach is there a specific reason why you want to structure this with multiple LLCs?

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