All Forum Posts by: Jeff Dulla

@Account Closed If the loan is closed within six months of purchase, even paying a private lien like that, it would actually be priced as a cash out refinance (delayed financing), which typically carries a slightly higher rate.

If after six months, he probably has a shot of refinancing as a rate/term which is slightly better pricing.

@Thomas Nolan If you are trying to go through conventional financing, you are talking about delayed financing. You can get your cash back out within the first six months after the purchase. You can only get back up to the original purchase price if the property is now worth more. 

As for best lenders, do a little research online and you can vet out a few lenders. I am sure someone else has some suggestions on here as well. 

@Daytyn Ragragola how long ago did you buy it? Since there are no leases, I am guessing you had to reno it? Are you finished with that? 

@Chris Mason Thank you so much for the mention. @Michael Tiema - the student loans will weigh into things no matter what. The question is how much will it impact your debt to income ratio and how the different loan programs will treat the payments. There is a difference these days between how Fannie, Freddie and FHA will interpret your monthly payments. If you have any income based repayment schedules, more than likely Fannie will be the best bet.

Please feel free to PM me if you would like to discuss further. Thanks again to both of you. 

@Mitch Reaume It would help to know who the lenders are/what kind of company they are. It could be on there but I couldn't make certain things out as it is a little fuzzy on this end. 

It is so easy for everyone to constantly weigh the quantitative side of things. Rate. Cost. Seem to be the only two things many look at. Honestly they both look fine on costs. The first one seems really low actually considering the rate. With just a glance, it looks like the first one is quite a bit better. Being a lender myself, I am shocked the first structure is being offered to you. If pricing on my end is any indication, that lender is doing that loan for next to nothing. Which should be alarming to you. 

I can't recommend to you enough to really weigh the qualitative side of things just as heavily as everyone seems to weigh the rate. One of these lenders probably has the back office staff to properly handle your loan. One probably doesn't. Look into the individual loan originator - do they have reviews? How do each sound when you have talked to them? How knowledgeable are they?

Any moron can just quote you a low rate. Does the lender understand the complexities of underwriting guidelines for investments? Are they aware of what overlays may stop your loan going through? Did they ask you in depth questions about the condition of the property? If the utilities are off, they need to be turned on for inspection at most banks - will that cause any issues? Did they ask about your future plans for this property?

Hopefully this helps. I know the initial reaction is going to be go with the first but it is honestly alarming to see the pricing on my end in correlation to that rate/point structure. Hopefully this helps. 

@Martin L. It is also untrue that if you don't use the proceeds from your cash-out that you are stuck paying interest on all of it. Most Prime loans these days do not carry prepayment penalties. Therefore any proceeds you do not use, you can simply apply back towards the principal balance, alleviating the extra interest you would have paid. 

@Martin L. I understand what Alpesh is saying but that doesn't sound like that is what you are doing. You are planning to hold the debt. So if you look at your weighted average, you are talking about a blended rate that is well into the mid 5's and subject to continue changing over even just the next year or so. Why wouldn't you cash-out, secure a 30 year fixed in the low to mid 5s and then hold it. It secures your blended rate below what your best case scenario for rates would be with the HELOC (and couldn't be farther from reality).

As for his point about your amortization starting all over again - it wouldnt matter if you are holding a HELOC for ten years and making those payments. Your amortization and proportion of interest on the HELOC would be completely outweighing much of the benefit he is talking about (especially since your HELOC is double what your current first lien is). If you were really worried about re-amortizing your current first lien, you could still cash-out and simply put extra towards the mortgage on a monthly basis. Especially the difference in how much extra you would be paying as your rate on the HELOC continues to rise above 7%.

Just my two cents. 

@Martin L. How long will it take you to pay down the HELOC? What HELOC rates are you being quoted?

@Ming Tsai How long to you plan to live in it or hold it? You can’t properly answer this question without determine your time frame with the property. If short, there is no reason for a fixed. If you plan to stay a long time or hold it as a rental, then yes - I do believe you could be looking at the end of historically low interest rates. Barring some economic/market set backs or something like that.

@Gabe G. Good follow up question and in my opinion, the answer to that is yes but based on underwriter discretion. The key being is that the new purchase is going to be your new primary residence. Yes - Fannie will treat the number of properties per the above guide - as long as the underwriter is agreeing that this is your primary residence.

That can be somewhat of a subjective thing. My guess is that the underwriter is going to look for the following:

- Does the new property fit with what is going on with your life (meaning family - bigger home, kids leaving- smaller home, etc)?

- Is it closer to work?

- Is there a clear benefit this new house provides you as a primary home rather than the old one?

As long as the property makes sense to the underwriter, you should be OK.