Can I Buy With High Rate, Hold For 2 Months, Refi Lower?
I found a little condo that I want. They are asking ~50k, owner wants out BAD! Comps are at ~70k. I want to know if I do a 90/10 or 95/5 and get a high rate on ~50k can I refinance in a few months at the appraised value of ~70k and pull out some cash? What are the legal aspects of refinancing a recent purchase? Thanks!
Note that this would be a rental, not Owner occupied.
iglooman
[ Edited by iglooman on Date 08/21/2003 ]
You might run into seasoning issues. Like purchases, lenders don't like to refi when owner has held title less then 6-12mo. Also if you are able to find a lender who eill refi you w/ no seasoning issues, you would have to check if you have any prepay penalties. Prepays are usually 6month of interest payments.
What you could try to do is take out a heloc or 2nd mortgage for the 20,000. You would avoid the prepay, if you have them, but you will still need to find a lender w/ no seasoning issues. The least amount of time I was able to refi someone was 3mo of holding title. Hope this was helpful.
ilgooman,
Yes, it can be done. However, you may only be able to pull out 80% of the appraised value of the unit. So your 70k unit would allow you to take 56k. This would leave you with a good rate and about 3k to take out after paying for closing cost. By the way, you can claim closing cost only once for the year. You would have spread the cost of the second closing cost over the life of the loan. The real good thing about doing this is the fact that you can now get rid of PMI (which is not tax deductable.
A very few may even allow you to go up to 85% equity with cash out. But your rates will not be as good and you will be back into paying PMI. Happy investing
Thanks guys. I'll have to think about it some more but the seasoning issue is good to know about. So, is seasoning a lender dependant issue, or is it the law? Also, is there any way to avoid PMI on the first mortgage if the pricipal is < 80% of appraised value? You mentioned a second mortgage, how would that work? Thanks for any help.
iglooman
Iglooman - actually, Texas is the only state where a refi w/ cash out is nearly impossible! You can only take out 3%... Consult with your broker or lender... But, I have run into this very issue.
Also, I would like to know what Lenders everyone's referring to... As, I consulted with several (albeit, large lenders), and got 1 year...before refi!
Countrywide Home Loans told me that they will do a rate and term refinance after I have been on title only one day. They do have an 80% LTV restriction on condos.
Of course, I am not in Texas and I don't know how their answer will change for your area.