3 Ways Real Estate Investors Benefit from Hard Money Cash Out Refinance Loans

Written by Posted On Tuesday, 24 November 2015 14:13

1. Cash Out and Reinvest Equity in a New Investment Property

Once a property has been held for a significant amount of time, it is likely that the property will have appreciated and built up equity for the investor. Instead of letting the equity remain in the property, the investor has the option of cashing out some of the equity and investing it elsewhere in a new investment property. Tapping into this equity is easy with a hard money cash out refinance loan. Most hard money lenders will generally allow up to a 70-75% combined loan to value. The cash out refinance loan should take around 1-2 weeks to fund and then it can be used as a down payment for the new investment property. The hard money lender should be able to help with financing for the new property acquisition as well.

2. Refinance to a Lower Rate and Pull Cash Out

In some cases, the investor may be able to refinance to a lower rate and pull cash out of their property at the same time. The investor may be able to find a new lender with more competitive rates or the whole market may have changed resulting in overall lower borrowing costs. The funds from the cash out can be put towards other projects or to increase current cash reserves.

3. Refinance an Existing Loan that is Coming Due

Often times an investment property loan is short-term (3-5 years) and has a balloon payment at the end of the term that must be repaid to the hard money loan lender, as opposed to being paid off completely as with a 30 year fully-amortized loan that most home buyers are familiar with. In this situation the investor is faced with three options: sell the property, refinance the existing balance or pay off the loan with cash. If selling the property or using cash to pay off the loan aren’t part of the investor’s current investing objectives, refinancing would be the best option. Pulling cash out to reinvest elsewhere would be possible at this point if the property has sufficient equity.

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Jeff Hensel

North Coast Financial, Inc. is a California hard money lender with over 37 years of experience specializing in various types of hard money loans including probate and estate loans, investment and rental property loans, bridge loans, fix and flip/rehab loans, purchase loans, cash out and refinance loans and other hard money loans with California real estate as collateral.


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