HML or "Financial Friend"

Here’s what I’m trying to do:

Buy a house for cash using HML or “Financial Friend”. The house will be my new personal residence. I would then refi in 30 days, paying off the HML or “Financial Friend”.

My whole reasoning for doing this, is to get into the deal for less $. It seems to be cheaper to refi. What are your thoughts?


[b]1.) What is the average cost for borrowing for such a short period of time from a HML?

2.) What would be fair to give a “Financial Friend” who is more than willing to put up the cash?
NOTE: Credit is Excellent and Lender will be in 1st pos. until I refi. Property will have roughly $50k in Equity.[/b]

Tax Question:

Once I have purchased the new home with a HML or “Financial Friend”, I will be selling my current personal residence. Will I be able to defer the gain from the sale? Do I have to sell my current residence first?

1- HML will whack you good with fees at closing or at payoff.
2- Ask your friend what is reasonable for him as an investment, not as a friend.

I have a rule that I don’t loan friends money. It usually doesn’t work out well, even if they do pay back. I’m not a bank and I don’t make money for a living by lending people money. That’s why I say make it an investment - if you didn’t know me, how much would it be worth it to you to risk your money on me?

Thanks stevie-o. Would it be cheaper to use a HML/Financial friend and then refi, or would going the reg. bank route be cheaper. I’m thinking the regular bank route would cost more due to all of the fees involved plus closing costs etc…

Just some simple figures…

Bank Scenario:
On a 300k loan, closing costs are roughly 3% of the LA = $9k
Down Payment of say 5% = $15k

Total would be roughly = $24k

HML/Financial Friend Scenario:
300k paid in cash at 15% APR would be $45k… $45k / 12mos. = $3,750
Let’s say that other charges come to: $3,000
Let’s say that the cost to refi is $5,000

Total would be roughly = $11,750

If I am estimating this correctly, HML/Financial Friend is better. Are my numbers “real”? Am I missing anything?

Thanks again…

I would say you are estimating your refi costs too low. Usually a purchase closing costs are cheaper than a refi (may vary depending on where you go).

Also, what’s the true value of the house?

House Value is: $278k

That’s the ARV (after repaired value) assuming you are making repairs or if no repairs, that is the appraised value?

If so, I don’t see how you plan on borrowing the said 300k whether to purchase or refinance?

I assume I’m missing something here…

It is very rare that a HM lender will entertain a owner occupied transaction—there are better programs available to homeowners/buyers interested in rehabbing their primary residence.

A program that comes to mind allows for up to 97 ARV, 6% seller concessions, doesn’t concern itself with credit scores, advances up to 50% of the cost of repairs at closing, etc.—additional info can be found on my website listed below…


Scott Miller