refinance question - Posted by Larry

Posted by NJDave on January 20, 2000 at 16:40:15:

Years ago I did the very same thing. I bought a fixer upper in a great area paying $19,000 cash. As soon as I took title, I gave a first mortgage to my Dad for $10,000. I then sought and received a 2nd mortgage loan from a institutional lender for $50,000. They didn’t even do an appraisal. No points, no closing costs, all that was needed was excellent credit and a homeowner’s insurance policy.

refinance question - Posted by Larry

Posted by Larry on January 20, 2000 at 16:25:03:

If I pay cash for a property and rehab it and then rent it out, how can I pull my cash back out to do it again? I’ve had mortgage brokers tell me they will only lend based on purchase price which would leave a lot of my needed funds tied up. I’ve had investors tell me that brokers will loan 90% of appraised value after the rehab which would be great with me. Who’s right and have I just not found the right one yet? Really don’t want to use hard money. Any help would be greatly appreciated!

Re: refinance question - Posted by Rob Blake

Posted by Rob Blake on January 21, 2000 at 24:37:11:

Larry the conventional lending guideline(A paper,low rates) states you can borrow up to 90% on a rate&term refi, not a cash out refi if you’ve owned the prop 6 months or longer using the new appraised value…but there’s a loophole you can use.

The guideline also states a rate and term refi also includes repaying you any amounts you can document for improvements. This means you can add up all receipts and add those to your mortgage amount and borrow that. Problem with that it is usually not enough. So like one of your other posters stated, “he gave a 10k mortgage to his dad” the reason for that is so it could be included in adding up the indebtedness for the “rate& term” refi. At the closing, his 1st mortgage is paid and the 2nd mortgage (his dad) is paid. Then his dad gives him back the cash, problem solved.

A couple of things to look out for…1) the second mortgage to be included must have 6 months seasoning minimum. So if you are going this route, you’ll have to be prepared up front. The last time I heard this done, the lender did not require the 2nd loan to be recorded or ask for mortgage verification…if this has changed, you’ll have to show cancelled checks for the 6 payments. You’ll need an experienced and aggressive mortgage broker on this one. That’s ok, if going to be at this, you’ll need him over and over again…might as well locate him now.

I know you don’t want hard money rates. I can suggest you go to your local bank. Don’t talk to the idiot with a smile up front. Call and set appointment with the Head of Commercial Lending. Explain your proposal explain their are a number or money sources you could use, but you want to start a “relationship” so eventually all you would have to do is call and get the money you need to take advantage of great deals that need quick action. Your goal is to get a Commercial Line of credit for $50,000-100,000. Not as hard as you might think…credit is looose today. Probably too loose.
Good luck with your investments. If you need help email me

Re: refinance question - Posted by Michael Morrongiello American Note

Posted by Michael Morrongiello American Note on January 20, 2000 at 16:47:46:

You need to speak to more lenders or mortgage brokers. Many of them will allow for cash out based upon a percentage of the “new” fixed up or renovated value when appraised. That LTV% typcially may be anywhere from 75% -85% LTV based upon the recent value.

Also be prepared to conclusively document what work and expenses you have invested into upgrading the property.

Michael Morrongiello