My mortgage broker can't be right... - Posted by Jamie

Posted by Dave T on February 16, 2000 at 13:18:50:

Generally speaking, it is easy to get a purchase money mortgage for 90% of the contract price (or appraised value whichever is lower) because the lender considers that your 10% down is helping share the risk of making the loan.

On the other hand, if you do a cash out refinance you could end up having none of your own money in the deal and therefore no incentive to maintain the property in good repair, and no incentive to continue making the monthly mortgage payments. Because the lender wants you to have a significant stake in the property, they will only do a cash out refinance for 75% of the appraised value.

My mortgage broker can’t be right… - Posted by Jamie

Posted by Jamie on February 15, 2000 at 22:00:39:

I hope someone out there can give me some info on this because my mortgage broker can’t be right.

According to her, there are loans out there where I can purchase a non-owner occupy property for 90% LTV. Great, all I need is 10% down.

So I ask her about refinancing a property and she tells me I can’t refinance for more than 75-80% LTV.??

Now I’m pretty new at this but is she right?

The reason I’m asking is because I want to buy a duplex. I could pay the 10% but of course I’d rather get it for nothing down. I believe I can buy this property with an 80% mortgage and a 20% seller carry but I would need to pay off the seller carry after 12 months. Fine, I refinance after 12 months and get the whole thing for nothing down. I believe the property will appraise for about 140-145k. I would be buying it for 130k. After 12 months I would need to refinance for about 129,000 (89% LTV) to cover both mortgages.

So, is my mortgage broker right? would I be unable to refinance this property for an 89% LTV.

By the way, the 80/20 purchase I mentioned above is based on a lender who would give a loan for 80% of the appraised value after a 30 day 100% seller carry. (basically a mini-refinance)I’m hoping it’s for a straight loan-to-value and not a combined loan-to-value, otherwise the 20% 12 month seller carry will come into play and all this mess won’t matter anyway.

I’m hoping someone out there may have a solution or some advise for me. Thanks for reading.


Re: My mortgage broker can’t be right… - Posted by JPiper

Posted by JPiper on February 16, 2000 at 14:31:29:

The first question I would be asking myself is why, as an investor, I would be buying a property with new financing for $130K if the market value is $140K. Unless there something that you haven?t mentioned, that isn?t a deal in my eyes.

Second, my guess is that your mortgage broker is correct. A cash-out refi for an investor of 80% of market is probably about it. I say ?guess? and ?probably? because lender policies change, and it?s always possible that someone out there might do better than that depending on you, the property, and the exact circumstances. It?s just unlikely in my view. However, if you were truly buying a ?deal?, that 80% might be adequate to pull all your cash out of the deal. That means you?d have to be buying for UNDER $112K. In other words, what?s wrong here is not the lender policy?what?s wrong is that you don?t have a deal.

Third, a lenders who will loan 80% on a purchase money deal, and allow the investor to carry 20% are not widespread. I?d verify that your broker can really put that type of loan together for you. I?m guessing that this loan is an owner occupied deal.