I bought a bank owned house couple months ago. It was rehabbed and instead of selling it, I decided to live in it. I wanted to get the equity out. Appraised value is 440k. Loan is 320k. I bought this house for about 340k. Is there anyway, I can get 120k out to invest in more prop…
Under the texas law, I cannot get it refinanced over 80%. 80% of 440 = 352k. That leaves me with only 32k. Is there any way that I can get a loan of 440 k instead of 352K. Any help will be appreciated.
I think you are stuck with 80% as far as HELOC or second lien from instituion goes… I am not a LO, but I haved done some HLOC on my primary and I can refi every year with no cost to bring the amount up… Texas is little weird in that sense…
DFW
Ronnie,
The only way to get above the 80% is to declare it an investment property and take off the homestead exemption. You would also need to prove it is an investment property.
Do you plan to live in the next one you buy?
Regardless of the answer to that question, you can still get 95% or even 100% financing on the new purchase- you can get the new mortgage in the form of an 80% 1st/ 20% 2nd and then when you move out of the one you currently occupy, it will no longer be your homestead, so you can legitimately claim it as an investment property.
Depending on your goals with the new property, you could then do a cash out refinance on the old property and get cash out to pay off the 2nd on the new one. This may or may not be the best financial move, however, because rates on investment property 2nds are extremely high when you go over 90% and also it may not fit into your long term investing goals to put all of your cash into your equity. You may be wiser to stay liquid.
Thanks so much…
This is still a vacant house since my apartment lease is not finished. I decided to live in this house only to get it refinanced and get the equity out. Technically, it is vacant but not occupied. I think some banks require house to be vacant for 6 months before they give exemption of homestead.
commercial loan will be very expensive as they go prime plus 2…
Interesting-- I didn’t know that about the 6 months vacant rule on exemption of homestead- could someone verify that who knows the laws in Texas?
There is no exemption to the homestead rule. Ronnie would have to contact his county clerk and have the homestead exemption removed. Then lease it to a tenant and then he could move forward with the cash-out. I like RJ’s strategy. He is correct that as long as you intend to live in the new property you could qualify for much better financing rates and LTV’s. Once you homestead the new property you can go get a HELOC on the investment property which allows you to stay relatively liquid, but not pay interest on the money until you are ready to use it. Depending on how many months you have owned the house you may have seasoning issues when you apply for either the cash-out or the HELOC.
Good advice…makes sense.
How about if I can claim my old house to be an investment property and get it refinanced as 80/15/5 and wait for about a month and occupy it myself ( I dont know if it is possible).
You would still need to have the homestead exemption removed and you would need to provide proof that you are living somwewhere else using a utility bill or a lease. It would be an awful lot of work to get that extra money. It is almost bordering on fraud because you are intending to keep it owner-occupied. As I said before you will also have issues with seasoning because you have only owned it for a short time.