Cash-out Refi's
I just want to make sure I am understanding this.
Is a cash-out refi ultimately a home equity loan?
Lets say for example, I buy a house for $50k with an ARV of $80k. It needs 5k in repairs. I get a hard money loan (at 10%) for $55k (which covers the 70% LTV that a hard money lender will fund). (I would be using a hard money lender because my debt/income ratio is hurting my credit). So, I rent it out for positive cash flow.
Now, I decide I want to cash-out the equity with a re-fi. Aren't I just creating another loan? and loosing all my equity if I want to sell later? I guess you only do this if you are going to rent out long term to get some of that equity back. But will the rental payment cover the original loan and the payment on the equity loan?
Do I get it re-fi'd with the original lender? Where would I go to get this and what perameters would a bank use to determine if I could get the refi? If I couldn't get a good rate in the first place, how could I get a good rate now? Or can you re-fi even if you get a good rate but because you have equity as collateral?
I think I am confused...: ) 
Lots of issues and questions in the post but let me address one. Having gotten a hard money loan, rehabbed the house you now have tenants renting it for hopefully a postive cash flow. You now go to a mainstream lending institution (Washington Mutual has some good programs) and ask them for a Cash Out Refi on a Non Owner Occupied property. They'll say their requirements are 80% LTV you say no problem I have 70%, they'll say, "great!" lets talk.
At this time you'll have a couple options. You should be able to take refinance the house at 80% LTV and take out 10% equity or refi at 70% LTV. A 70%LTV will get a lower interest rate.
Crunch your numbers, see what works best for you, and go for it. If you plan on holding this property for a long time it is a great time to refi because the rates are so low.
Good luck and let us know what you do...
Q
You just need to crunch the numbers. I just bought a house for 53000, 10000 down on an owner contract with a balloon due in 2 years so I did not have an option whether or not to refinance. I went to wa mutual. I am refinancing at 70% LTV, 6.3% rate 30 yr fixed. My payment went up 3 dollars my original loan was on a 15 year amorization schedule) and I pulled out 17000 in equity. So it worked out for me.
Quote:
On 2004-02-04 12:19, caseycat wrote:
I just want to make sure I am understanding this.
Is a cash-out refi ultimately a home equity loan?
Lets say for example, I buy a house for $50k with an ARV of $80k. It needs 5k in repairs. I get a hard money loan (at 10%) for $55k (which covers the 70% LTV that a hard money lender will fund). (I would be using a hard money lender because my debt/income ratio is hurting my credit). So, I rent it out for positive cash flow.
Now, I decide I want to cash-out the equity with a re-fi. Aren't I just creating another loan? and loosing all my equity if I want to sell later? I guess you only do this if you are going to rent out long term to get some of that equity back. But will the rental payment cover the original loan and the payment on the equity loan?
Do I get it re-fi'd with the original lender? Where would I go to get this and what perameters would a bank use to determine if I could get the refi? If I couldn't get a good rate in the first place, how could I get a good rate now? Or can you re-fi even if you get a good rate but because you have equity as collateral?
I think I am confused...: ) <IMG SRC="images/forum/smilies/icon_eek.gif">
Yes you are confused. Anytime you take out a loan and received more than 2% in your hand at closing it is a cashout refi. Anytime you receive no cash that is a rate and term. Regardless of how you look at it, if you have a hard money loan you are going to have to do one thing. Pay it off either by refi-ing or selling the property.
Lori
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