Refinancing my duplex

[Noah McPherson]

Hey Everyone,

I'm a beginner investor from Duluth, Minnesota, and I'm closing on my first duplex July 8th. Since I'll be house hacking, I'm considering renovating the unit I'm in and doing some exterior work as well. If my goal were to put my money into the house in the hopes of refinancing rather than saving up for a down payment, what would be the risks involved. I'd like to get a house this time next year, and I'm wondering if that strategy would get me there.

[Tim Swierczek]

@Noah McPherson There is a very large difference in the loan-to-values for a house hack purchase versus a house hack cash-out refinance. Conventional guidelines require you wait 6 months from the date of purchase to refinance with a cash-out loan and your maximum loan-to-value is 80%, if the new loan is FHA (not the current loan) you need to wait 12 months to use the appraised value and the loan to value is 80%. This means if you purchase with an FHA loan you will need to add 20% equity, plus closing costs and the amount of cashback you want to realistically be able to use this method.

Another option is to use your money and do a HELOC to recoup your investment, but with this option, you will need to find out if they will use a new appraisal in less than 12 months. Each bank will be a different maximum loan-to-value and will have different appraisal seasoning timeframes.

This is a long answer to your question, the short answer is "No, it's not likely to be the right strategy to get you there unless you are adding massive value."