No Seasoning Cash Out refinance products allow savvy buyers who paid cash for a property to recoup cash immediately. Cash purchases provide price leverage. Also, they tend to be more attractive than competing financed offers. However, paying cash ties up liquid resources limiting investors ability to leverage. The No Seasoning Cash out Refinance is a great solution to this common conundrum.
No Seasoning Cash Out Refinance
First of all, home-buyers must typically wait out a long 6 month “seasoning” period before completing a cash-out refinance. This rule is often what complicates a buyer’s decision to finance or use cash for a home purchase. However, buyers that paid cash for a home DO NOT have to wait 6 months.
A cash-out refinance can be started the day after your cash purchase closes. In fact, this applies to a primary residence, vacation home or investment home purchase. A no seasoning cash-out refinance immediately following a cash purchase without a 6 month seasoning – what could be better?
No Seasoning Cash-Out General Requirements
- New loan amount may not exceed cash paid for property + refinance loan settlement charges
- Subject property must have been a cash purchase
- Only acceptable sources of purchase funds permitted (see below)
- No liens allowed subject property prior to refinance
- Maximum loan to value limits (1 unit):
- Owner Occupied 85%
- Second Home/Vacation Home 75%
- Investment Home 75%
- All other/normal cash out guidelines apply
This is a great way for cash buyers to leverage a cash offer initially and then ultimately finance that same property. To make it better, there is no 6 month waiting period to do so.
Limitations on No Seasoning Cash-Out Refinance
Finally, there are a few limitations worth mentioning. While most of these are not typically an issue, it is important to make sure before committing to a new cash-out refinance.
- Borrowers may NOT refinance a hard money loan
- Buyer of subject property and borrower for the cash-out loan must be the same
- Subject property cannot have closed in an LLC.
Acceptable Sources of Cash for Initial Purchase
On a no seasoning cash-out refinance, borrowers can pull cash back out of their recently purchased property if the purchase cash was from an acceptable source. Acceptable sources include:
- Cash from borrower’s own financial accounts
- Funds from a home equity line of credit
- Funds from a personal loan
In conclusion, cash buyers have access to what the mortgage industry calls “delayed financing”. In short, the no seasoning cash-out refinance loan allows buyers to pay cash first. Then, at a later or “delayed” point in time and without a 6 month wait that same buyer can pull cash out and finance the same property.
By Jeremy House