Cash Out Refi Rules- Pop Quiz!

Caeli Ridge recorded this episode on 6/13/2023

During this episode, Caeli Ridge discusses Cash Out Refi Rules and has a lively Q&A with participants who are vying for a prize! Pop Quiz style, Caeli Ridge talks BRRR, and Cash Out Refi Scenarios. 

Check out the video with the screen share and the documentation in the Community.

You can join these live each week by following this link to join the call:
https://community.ridgelendinggroup.com/events/live-with-caeli-each-tuesday-beginning-at-430-pm-et/list

As always, give Ridge Lending Group a call if you have any questions at 
855-747-4343 or email us at info@RidgeLendingGroup.com

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Transcript

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Reminder

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Karlie Libby: I just recorded. I don't think it was recording Karlie. Sorry, honey. I'm gonna start over everybody, all right. Everyone. Hello and welcome to calling all real estate investors. We are here every Tuesday, at 1 30 Pm. Pacific time and 4 30 Pm. Eastern time for a live event with Caeli Ridge from Ridge lending group.

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Karlie Libby: please, today utilize the chat feature. If you have any questions throughout the call, or you can use the raise your hand feature, and we will call on you when applicable.

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Karlie Libby: Another reminder. We love participation throughout these calls always, and especially today, Caeli will be discussing cash out refi rules. And we're gonna have a few questions and polls along the way for you to participate in. So please definitely do so, and I will hand you off to Caeli.

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CAELI RIDGE: Thank you, Miss Carly. Hi, everybody! This is live. I'm back for the first time. I feel like it's been a year, but I think really it's only been about 6 weeks.

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CAELI RIDGE: so thank you for being here and taking your your time in the afternoon to be a part of this education, ongoing education for real estate investors. real quick. So it's Carly and I now I think I mentioned this, and when I was down in in Tucson, that she is going to be kind of my co-host, and her and I are learning together some of the technology of this. And as a result, I took over being host and she's co-host. So now I have to keep an eye on the participants and

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CAELI RIDGE: admit them in. So if anybody is a zoom aficionado that knows how I can remake her, the host, so I don't have to keep an eye on admitting people as they pop in, because usually people come after the first few minutes. Please put that in the chat for me, and I'll figure it out because I don't see it here easily.

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CAELI RIDGE: Hurley, if you I mean, if you find out, let me know, and and I'll make you the host again and blah! Blah! Blah, anyway.

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CAELI RIDGE: Hi, good to be back. thank you for being here again. So today, you guys saw the the headline. What we're gonna be talking about is cash out refinances. And this is your pop quiz. And the more participation there's another guest. I'm sorry you guys, the more participation we get, or who is participating the most or answers the most correct questions is going to get a prize and that prize is going to be $200 off your next loan with Ridge landing group, whether it goes to the appraisal or

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CAELI RIDGE: lender fees, or whatever. So

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CAELI RIDGE: gift card gift certificate to be used towards your next loan with Ridge learning groups. So participation. I'm I'm doing this, you guys. I know it's not a a huge concession here. But I'm I'm doing this to kind of garner more participation. I want to hear what you guys have to say. and and where your comfort levels are with with understanding. And in today's case about cash out refinance. So let me just get started on that. I want to. There's a housekeeping, a little bit of housekeeping stuff I want to start with.

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CAELI RIDGE: and you guessed it. Yes, it's about interest rates. Everybody's favorite topic. and I'm gonna have some polls that Carly is going to put up. I'll trigger you, Carly, when I'm I'm ready for you to ask some. I think most of them are yes and no questions. but first let's talk about interest rates. Everybody is very obsessed, always obsessed. No matter what I say, everybody really wants to focus on on interest rates. So I want to address a few of those talking points. first, let's talk about real time.

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CAELI RIDGE: most of you. If you're watching the headlines about this and your feed comes up. You know that the Feds are meeting today, and tomorrow we're gonna hear pretty soon. sometimes they do it on the first day, a lot of times they do it. The second day of the the Fed meeting. What they're gonna do with the Fed Fund rate, and there's been a ton of speculation over the last couple of weeks, as there always is about what Mr. Jerome Powell is going to be saying they're gonna do what they voted on.

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CAELI RIDGE: Many people think that they're going to pause a lot. Then, on on the adverse think they're going to increase another quarter of a percent, you know. I

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CAELI RIDGE: I hope they pause. But I'll tell you something that from the lending perspective related to mortgage interest rates, secondary markets, Wall Street

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CAELI RIDGE: they they tend to already bake in the worst case scenario. So the interest rates that we've been quoting for the last week 2 weeks. already assumed that the Feds would be raising a half a point I noticed that yesterday and today we saw a little bit of improvement in mortgage backed security rates. but as of later today, this morning we woke up and race. We're posting pretty well the best that I've seen them, probably in the last 2, 3 weeks. And then, lo and behold!

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CAELI RIDGE: We had an intraday reprise to the negative. So rates are kind of back up a little bit. So that's where where we are today. I'll give you some specifics in a minute. what are they gonna do?

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CAELI RIDGE: Let's hope they pause, and if they do, I think we can expect some improvements later this week, and maybe for the trailing weeks after that I don't think we're done with. The rate hikes In fact, I would put big money on the fact that we're not done with the rate hikes unless some catastrophic event

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CAELI RIDGE: befell us. Hold on. I gotta let people come back in. Admit all.

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CAELI RIDGE: Yeah, Carly, I can't see where to to put you back as host. So if if they pause, I think that we might be in an we might have an opportunity to strike. Will the errands hot. Get a little bit better in rate Otherwise I would be prepared for more rate hikes this this year. We are not at the inflationary rate that the Feds have been absolutely clear about meeting. They're going to get there at all costs. So be prepared for some of that. I would tell you guys, and I think that I predicted this last year that

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CAELI RIDGE: some easing of of interest rates. I think I said, some time around fall, maybe a mid to late fall of this year. Let's hope that I'm right. otherwise, if we continue to kind of see these amazing job reports which are not working to our advantage. It's funny because it's a double edged sword, right? We want the economy to be doing well. But the better we're doing over here, the more we're going to start. We're going to continue to see those those interest rates go up.

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CAELI RIDGE: The last job reports, I think, that the prediction was 195,000, and it came up with 335,000 new jobs.

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CAELI RIDGE: So that didn't help us in in the right sector.

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CAELI RIDGE: all right, as I'm I'm dribbling on about this. I'm still going to hold tight on some starting to see maybe some potential right improvement mid to end of fall of this year, and if I'm off the mark a little bit, then let's look into 2,024 for anything material. and remember, rates will always fall much much slower than they go up. Rates always go up much quicker than they come back down. So we're going to have to be a little bit patient with it.

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CAELI RIDGE: so that's where we are today. I want to. You know, I want to beat the drums, continue to beat the drums

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CAELI RIDGE: about interest rates. Let me let let's ask a question. Here's a yes or no question. Okay, here's Paul. Number one. Carly. how many of you here today are what kind of waiting on the sidelines for rates to come down before you make any next moves on, and in any new acquisition and or refinance

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CAELI RIDGE: list of of of hands. Yes and no, I guess. Yes, you're waiting. No, you're not waiting.

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CAELI RIDGE: and if it's easier in the chat, Carly. If if there's a technology thing, no, no worries, honey, we'll we'll get it figured out.

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CAELI RIDGE: So far we got we got 3 nose. Thank you guys for participation for knows.

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CAELI RIDGE: Keep them coming, guys.

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CAELI RIDGE: Mr. Michael. Yes, Ron, yes, Justin. Yes. Okay. So right now, it's a pretty good mix 50 50, maybe.

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CAELI RIDGE: we've got stopping us from moving on, but not stopping from creative financing. Good, Chris, I'm glad to hear that. That's actually

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CAELI RIDGE: a great answer. polls not working. Okay, we'll we'll get the technology. You guys know what I'm like with technology. I'm gonna put this on me. I'm not. Gonna

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CAELI RIDGE: I won't give this to to Carly. I'll take it. technology and me not not so, not so much.

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CAELI RIDGE: okay. let's let's just take another minute and talk about interest rates before I get into today's topic.

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CAELI RIDGE: one of the things that I I feel like is missing from a lot of people's mental rolodex. When we we talk about interest rates, and especially those that are kind of waiting on the sidelines for rights to come back down before they do anything

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CAELI RIDGE: because their expectation for monthly cash flow, or maybe the market they're looking in, or their strategy. Whatever has been depressed, they they haven't found a way to reinvent themselves and or set that new expectation. Those that think that they're going to get 3, 4, $500 a month of positive cash on a long term rental.

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CAELI RIDGE: that they were getting in, and 2,02021, even parts of 2,022. I would say that that again single-family, long-term rental we have to classify it.

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CAELI RIDGE: Those days are over. So if your expectation is in that range, you're going to be waiting for quite a while, and and in that that interim you're going to be missing out. That is my personal and very strong opinion. you will be missing out on otherwise up great opportunities to start your real estate investing. And if you were to do it this way, and if that's your your strategy. That's perfectly fine. But keep in mind whatever your goal is, your long term big picture goal.

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CAELI RIDGE: If you're going to do it in a way that you're going to wait for the absolute best rates and and best cash flow, and that expectation, whatever that is in your head, or that Roi number It'll take you 2 or 3 or 4, 10 times as long to meet those benchmarks and realize those milestones within what your your goals are. Okay. So just know that the other things I wanted to mention to you guys remember, as rates are high today, what do we as investors do?

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CAELI RIDGE: Do we keep, I mean, do we? We secure mortgages on a 30 year fixed basis, and keep those mortgages for 30 years? How often does that happen?

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CAELI RIDGE: It is excessively rare, I mean, in in the fraction percentage. Very, very, very rare do we keep the interest rates we start with.

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CAELI RIDGE: especially for not on our occupied, maybe not as true, for owner occupied even for not on a rocky or owner occupied is still a very small percentage. we're already starting to see some people that got their their 2 and a half and 3% interest rates refinancing in a new products to tap into their equity. Most of them are looking at the All in one, not everybody. But in any case, you know, you get into those really really low interest rates, and you tell yourself. I'm I'm never going to refinance again.

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CAELI RIDGE: So that's that's probably not true. Okay, so that's the the first piece of this expectation, setting the appropriate expectations. for what the returns need to be not passing up on opportunities to reach your long term goals

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CAELI RIDGE: And then finally.

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CAELI RIDGE: I talk about this a lot, one on one, and I don't know that I've ever brought it up here in our our live events.

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CAELI RIDGE: That those of you that are are more focused on the tax benefit. Okay, some of you know that you have some tax benefit that you can get at Others of you are really kind of focused on what you can, you can achieve within the right offs on your schedule. E. Whether it be a business. Turn your personal return to mitigate the amount of taxes that you're paying for you especially. And if you're in that same category that says you're kind of waiting for interest rates to drop before you do anything.

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CAELI RIDGE: I want to bring to your attention. If it wasn't already obvious, if you had a 4% interest rate, and you know, you probably know, if if tax benefit is important to you, that you get to write off the interest that you pay on your schedule. E. Right. That's one of the deductions that you get to write off, and it happens to be one of the deductions that will not work to your disadvantage when we're calculating debt to income ratio. I won't go into all of that just to say that insurance taxes.

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CAELI RIDGE: interest and appreciation as an example, those 4 are add backs. They will not work as actual expenses and harm a debt to income ratio. When we figure this schedully calculation, they'll work to your advantage. Actually. So going back to my point, if you had a 4% interest rate that you're deducting interest on right. And you've got the the cash flow there. What if you had a 7 or 8% interest rate?

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CAELI RIDGE: Is the interest higher that you're claiming as a deduction

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CAELI RIDGE: heck, yeah, and depending on the loan size, it could be quite a bit higher. So you know, I'm always beating the drums about doing the math, and I don't know what everybody's tax bracket is, and what their circumstances are, so I can't really give you that information. I'm look unless I'm looking at it with you, one on one. But

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CAELI RIDGE: if your cash flow at 8 is $200 versus

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CAELI RIDGE: 6%, whatever it is, at 300 bucks. Okay, again, whatever the numbers. If you're not including what the longer term tax play is going to be there with the extra interest that you can claim versus what you're losing in the monthly cash flow. You should be okay off my soap box and upset. If you guys have questions, put them in the chat, I'll answer those at the end.

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CAELI RIDGE: Okay? So polls are not working right Curly.

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CAELI RIDGE: Now, she can't talk.

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Okay. Alright. So I am. I'm on my own. That's okay. You guys are going to I've got some clients waiting is what somebody said.

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CAELI RIDGE: One new message. I've let everybody in. I have to unmute Carly, and let's see.

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CAELI RIDGE: I don't even know how to do that. I'm so sorry, you guys.

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CAELI RIDGE: Oh, I figured it out, asked to unmute. Yes. Hello, everybody so sorry about the technological difficulties. We're figuring it out. But polls are live. You'll just be the one to. It's down at the bottom there polls, and it's all, I think 4 questions we have. Thank you. Dear. Okay, guys.

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CAELI RIDGE: okay.

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CAELI RIDGE: so cash out refinances. This is coming up a lot. There's been some recent changes to guidelines. We usually focus law on the conventional. I do have notes and and updates for you on the 9 Qm. For those of you that are in that bucket, the all in one, etc. But most recently, this year, a couple of months ago, we had some pretty significant changes to what was allowed for cash out refinances on non owner occupied. So here's my question. Number 2, I think this is also an a yes or no question. Let's get back there.

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CAELI RIDGE: polls and cash out rules waiting on race to come down to the question.

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CAELI RIDGE: Missed step. I don't know which is which part Carly, do you?

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Karlie Libby: Yeah, let's see.

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Karlie Libby: are you looking to ask who is done or interested in Br?

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CAELI RIDGE: And it was the how many of you have recently attempted a cash that's missed up. Okay, thank you.

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CAELI RIDGE: Okay, launch.

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CAELI RIDGE: Okay? So here's the question. So those of you that have it. It could be Burr. It could just be cash out refinance. How many of you recently have gone to do a cash out refinance and then realized that you did it wrong in the acquisition. You purchased it wrong. You didn't add something to the final CD and one of 2 things. As a result of that, you either had to leave money on the table, or you have to wait to get your capital back.

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CAELI RIDGE: That's the question.

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CAELI RIDGE: Oh, good! This is looking good, so it looks like most of you might be up, really up to speed with what those rules are. We're gonna go over them, anyway. so so far nobody has has made that mistake of purchasing a investment property under the expectation. You're gonna do a cash out refinance, and you missed the new rules that would have a

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CAELI RIDGE: either made you wait.

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CAELI RIDGE: or B. You had to leave money on the table. Nobody's done that. That's actually excellent news. So congratulations to all of you, you're paying attention. okay.

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CAELI RIDGE: so let's talk about. I'm gonna ask a couple of questions. And in the chat we're gonna look at. Oh, I guess I can share the results. Okay, stop sharing. You guys get to see everyone else.

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CAELI RIDGE: I'm gonna have you guys put it in the chat. I think for me on the next one is going to be a little bit easier. So, starting with with conventional cash out refinance.

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CAELI RIDGE: does any? Can anybody tell me.

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CAELI RIDGE: What is the difference between having extra seasoning requirement versus not, and how you acquire the property? Does anybody know the difference between how you have to purchase the property.

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CAELI RIDGE: if I say it, I'm going to give it away. But does anybody know what you have to do in acquisition in order to remove any seasoning requirement on a cash out refinance.

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CAELI RIDGE: It's the difference between purchasing a property one way and purchasing it another way. Anybody?

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CAELI RIDGE: Okay, it's the difference between

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CAELI RIDGE: paying cash for the property and using leverage.

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CAELI RIDGE: Yeah, Justin got it. I was. I was. I was saying it just as you were probably typing Justin.

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CAELI RIDGE: The difference in the conventional guidelines and the seasoning. The new seasoning requirement is specifically about paying cash versus using other people's money to acquire the property. Now one caveat when we talk about other people's money. Okay, if we use other people's money, and that leverage was recorded as a lean against the property

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CAELI RIDGE: that that will will change the seasoning. The seasoning requirement has now extended, and I'm not giving the actual new seasoning requirement, because that's one of my questions. I'm not going to give it away versus if you use other people's money. And it was not a lean recorded. It was just a private note. Your Buddy John or or Emily said, here's the money. Go! Do what you want. I trust you. I'm not going to record. Lean against the property now. I wouldn't do that. Chances are none of you would probably do that. But if it were a private

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CAELI RIDGE: note, some kind of a promissory note that was the key was not recorded

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CAELI RIDGE: with the county against the property. then that scenario would fall into an all cache purchase.

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CAELI RIDGE: Okay? So the difference in seasoning is cash acquisition versus using leverage, and if you've used leverage, it would apply if it was a recorded lean. If it's not a recorded lean, we're gonna treat it more like a cash purchase. Okay.

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CAELI RIDGE: the seasoning requirement. Who knows what the new seasoning requirement is for? Cash out refinance hash out refinancing conventionally.

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CAELI RIDGE: Yes, Chris, nice. One year, 12 months. Who knows what it used to be?

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CAELI RIDGE: 6 months. Good, you guys! Excellent! So they extended the the wait time, the seasoning time by 6 months. So if you use leverage.

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CAELI RIDGE: it's no longer 6 months. You gotta wait a year to do a cash out refinance. Now, a very, very important distinction and people constantly mistake this.

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CAELI RIDGE: there is a very distinct difference between a rate and term refinance and a cash out refinance. I want you guys to really focus on this for a second. Okay.

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CAELI RIDGE: if you did use somebody else's money, you use leverage. It is a recorded lean, and all you care about doing is paying off that existing lean plus the new closing costs.

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CAELI RIDGE: Some people in their mind thinks that's a cash out refinance because they didn't necessarily come to the table with with any money depending on the terms of the first loan. Right? That that short-term bridge money loan. that's a rate in term refi guys. The only time it's cash out is when you are physically getting cash in hand.

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CAELI RIDGE: Okay, so make sure that you understand that distinction a rate in term refinance. No seasoning required

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CAELI RIDGE: cash out. Refinance when you get cash in hand is when seasoning is required. If

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CAELI RIDGE: you have secured leverage recorded, lean against the property. Okay, everybody clear on that. I mean feel free to to wave your hand, or, you know, give the thumbs up, or whatever you can do on your thing if you have questions, please let me know.

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CAELI RIDGE: very, very important. when we talk about the the seasoning versus the non-seasoning, all of what I've described in every facet of everything I've talked about so far assumes that we need and are using

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CAELI RIDGE: the Arv

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CAELI RIDGE: okay to make things even more complicated

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CAELI RIDGE: if the deal is okay, to use your purchase price

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CAELI RIDGE: very rarely the case. But if you can use the purchase price versus a higher Arv a praise value.

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CAELI RIDGE: Then the seasoning issues are no longer an issue anymore. We can go immediately without seasoning.

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CAELI RIDGE: If we're using the purchase price.

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CAELI RIDGE: Okay, I won't focus too much on that, because it's such a rare situation, and I think it confuses people a lot. But if you have questions, feel free to to ask me everything that I'm talking about with the seasoning and the leverage and the cash, etc., assumes that we need to make the deal work, the appraise value or after repair value, whatever the case may be. All right.

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CAELI RIDGE: okay.

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CAELI RIDGE: let's say that. Let's let's take the cash, purchase a step further. this is another common mistake

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CAELI RIDGE: the rule related to how much cash you can get back in hand. Does anybody know the rule

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CAELI RIDGE: that tells you if you paid X for it, and we know what the Ltv maximums are. Let's just say it's 75% of the Arv, that's our Max Ltb. Does it? Can anybody tell me what the Max cache you are entitled to get back the absolute

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CAELI RIDGE: highest dollar amount without seasoning? Right? We're in that space where we paid cash for it. We haven't used leverage. We don't have to wait 12 months. Does anybody know how much maximum you can get back in hand.

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CAELI RIDGE: All right. The answer is, whatever is listed as your total acquisition cost on your final closing disclosure.

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CAELI RIDGE: So if you paid a hundred $1,000 for the property. and there was $50,000 in renovation. but that $50,000 was paid the day after closing. and that was sent to the general contractor the day after closing, and your final closing disclosure only said $100,000 on it.

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CAELI RIDGE: The answer is 100,000 plus whatever maybe minor costs were associated with that that could be part of it. Those are your acquisition costs listed on that final closing disclosure, and that is the maximum

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CAELI RIDGE: on a cash purchase.

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CAELI RIDGE: unless you have 12 months seasoning. In which point, then it doesn't matter anymore. But if you want to get that cash back before the the year is up which most of us are not going to tight. Want to type our capital for a year unless I guess it's some massive extended rehab thing that's going to take a year, anyway, in which case it doesn't matter. But if you want to get your capital back sooner. The rule is, you cannot get more money back than is listed

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CAELI RIDGE: on that final closing disclosure. So then the next follow up question ends up being

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CAELI RIDGE: well, how I I have to pay the general contractor before they start the work right. How how do I do that? How do I get that on on the

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CAELI RIDGE: the final CD, the answer is, we work with an escrow company that will do what's called an escrow. Hold back.

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CAELI RIDGE: Okay, both the acquisition. The purchase price and the renovation cost will be listed on the final closing disclosure. So in my example, $150 is going to be listed there.

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CAELI RIDGE: the Escrow company that will facilitate, and as for a holdback, will distribute the 50,000 to the general contractor in draws that have been pre-approved by you.

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CAELI RIDGE: Okay? So you've you've got that that protection in place so that you're not just handing $50,000 off to a general contractor, that you may or may not have a relationship with before any of the work has begun.

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CAELI RIDGE: It is very, very, very important that if you're expecting a scenario where the Arv is so high and our Ltv. Maximums would allow you to get a full 150,000 back.

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CAELI RIDGE: that that number, both of those numbers is listed on your final closing disclosure. because otherwise you're only going to get the 100 grand. You're leaving 50,000 on the table.

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CAELI RIDGE: Okay, let's say that that's not a a a scenario that you can. you have any control over, and maybe it's already happened. But the renovation was only 5 grand.

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CAELI RIDGE: Okay, depending on what the Arv is leaving. 5,000 on the table is probably not going to be a make or break for for most people, especially if you're getting back the entire other acquisition costs. Right? That's almost 100% leverage. So it's probably not the difference between

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CAELI RIDGE: you know, whether you would be willing to wait or not. I guess it depends on what that A or B comes out to be.

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CAELI RIDGE: if well, here's another scenario. Okay, let's say that that you've got you did it right. And you had a hundred 50,000 on the final closing disclosure. And just, I'm just throwing out stupid numbers. The Arv comes in at 300,000.

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CAELI RIDGE: Okay, somebody do the mental math for me. What's what's 75 of of 300,000? I can't do mental math. You guys know this about me. Come on. Who's got it? Let's see who's first.

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CAELI RIDGE: Am I? First 225,000.

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CAELI RIDGE: Okay, who got that? Chris got it? Chris is on on time. so 225,000. Okay, that let's just say this is a real deal.

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CAELI RIDGE: And I have a hundred 50,000. That's my total acquisition cost my purchase price and my renovation all in. That's every cent that I've spent. I got it on the CD. I did it all right. But my value comes in at 300,000. Okay, I've seen stuff like this happen. It's fairly rare. But whatever we'll talk about it,

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CAELI RIDGE: am I going to refinance right now? And I just closed on it, and the renovation is going to be done in in 3 weeks? Right? And that's all the money that I have to tie up for

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CAELI RIDGE: my next acquisition. Am I going to leave 75,000 on the table

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CAELI RIDGE: and get my money now.

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CAELI RIDGE: and you know, keep going. Or am I going to wait 12 months

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CAELI RIDGE: and and get it out then, and and just let my money sit.

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CAELI RIDGE: or

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CAELI RIDGE: potentially. What if I were going to instead, go get some kind of a short term bridge long, a hard money long, a private money loan. Okay. Interest rates are going to be higher. You have a second set of closing costs that might cost you 10 grand agram. Whatever it is.

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CAELI RIDGE: you get the full thing out. Then you come back to us, and then we do a right in term refinance. No seasoning is required on rate and term right?

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CAELI RIDGE: So that could be a workaround. If you find yourself in a situation where you've done everything right, and the praise value comes in X higher than and than expected. You have a lot more capital sitting on the table that you could get your hands on. That would be an awesome workaround scenario for you to accommodate getting that cash without having to wait. It does require, you know, 2 sets of closing costs, but if the total closing cost ends up being $20,000,

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CAELI RIDGE: and you're $75,000 richer than what you were going to be before. Okay, I'll take the 55,000 and not have to wait 12 months anyway. Those are things that you can do. Just remember the differences between the cash out

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CAELI RIDGE: and the right in term refinance. Anybody have any questions so far about? Let me look back through. Were there questions on here? interesting. So you can't pull sweat, equity out, even if it's under the Max. 75 under the L. TV. Chris, would you? let me unmute you?

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CAELI RIDGE: I want you to ask that question because I want to make sure I answer it correctly. And I'm not sure I understand it. Where's Chris?

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Chris Barrett: Thanks, really. So yeah, this was actually interesting. So this happened on my or

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Chris Barrett: where they would, I purchase this property in 2,022 renovated has a duplex, or, on behalf hold out a he lock on it and then renovated the other half.

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Chris Barrett: And the other basically wanted to pull that. You know that equity pay myself back this spring.

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Chris Barrett: and they only allowed me to take cash out for my expenses for the total property. Essentially so, even though

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Chris Barrett: my the property appraised at 5, 30. I bought it for 350,

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Chris Barrett: and I spent $68,000 in renovations.

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Chris Barrett: And so the

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Chris Barrett: the total in was 410,000 or something like that. But the total wasn't on the on the final CD right? Right?

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Chris Barrett: What was the what was the month of purchase the month of purchases. February first, 2,022. You're good, you gotta hear me, and so I should have been good, but they still wouldn't play ball.

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CAELI RIDGE: Was it a conventional loan?

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Chris Barrett: It was? No, it was originally a commercial 5 year balloon, but a but a a credit union bought out the lender in. He was not interested in

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Chris Barrett: cooperating, basically with anything that was going on on the investment sphere of things. But my question comes from. if in that same situation, if the numbers were the same and the appraisal value

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Chris Barrett: is much higher than basically your cost. Taking you back to that 75% loan to value. Can you not take out that extra equity then, even though you didn't spend that money on it?

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Chris Barrett: It's my question. So if I again, if I bought it, say, say, it's worth 600. I bought it for 3 50. I've spent 70,000 on renovations. But there was probably like 10% ish left of equity in there. So you can't take that cash out, then on that 10%.

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CAELI RIDGE: Not until not so if it was not listed on the HUD

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CAELI RIDGE: right? It wasn't. Wasn't listed on there. And it wasn't part of leverage that we're simply paying off. The answer is, no, not until you've hit the full 12 months, unless

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CAELI RIDGE: the scenario that I just gave you. If I went and got another loan

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CAELI RIDGE: paid some extra fees, you know, a higher interest rate for a month or 2. Those those loans aren't going to have any prepayment penalties, and then turned around and did a rate in term refinance to get rid of that higher rate loan where you got all your cash because they're not going to have the same seasoning restrictions, or they shouldn't. And if they do.

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CAELI RIDGE: you need, you guys need to call me because we have lots of of options for the shorter term money. That won't. We won't apply any any seasoning, so you can get your cash, and then we'll just simply do it right in term refinance and rate in term, refinances can go to 80% guys.

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CAELI RIDGE: So there's a little bit more room. Obviously, remember, the higher the L TV loan to value the higher the rate is going to be. But you know we have to factor in and and do the math and see how that all plays out. But That would be a perfect example, Chris, of

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CAELI RIDGE: if there's enough spread between what you actually have into it and what it really appraises for it probably is worth going and paying 2 sets of closing costs. If there's enough spread, if it's 5 grand or 10 grand.

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CAELI RIDGE: I think I I did you say? 10 grand or 10? I don't. I don't remember what you said, but you know doing to to refinances one where you're not limited to seasoning. You get all the cash.

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CAELI RIDGE: and then a rate term refinance to get rid of the the higher rate into some 30 or fixed lower rate mortgage

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CAELI RIDGE: that would be your workaround if you didn't want to wait the 12 months. Otherwise you're going to wait the 12 months.

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CAELI RIDGE: Yeah. okay, let me see if there's any other questions. Thank you so much. Chris. Really appreciate the questions and the interactiveness.

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CAELI RIDGE: Let's see what Jim says. What about. If you need to rehab. Can you refinance? The air be after rehab is completed?  Jim, I think I understand. I'm going to unmute you, too. Let's let's have you ask your question, would you?

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CAELI RIDGE: Yeah, I think.

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Jim Gillespie: can you hear me? Okay, yeah. I think you answered that with Chris, because I'm a following what the protocol would have to be. because I I was under the impression that

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Jim Gillespie: you know you could the right term refinance. I didn't realize there was an extra layer in there where you had to maybe use hard money. But in Chris's examples there's so much equity in there you would want to get that out as quickly as you can.

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Jim Gillespie: Yeah. So it did it.

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Jim Gillespie: I mean, can you use? Well, no, I guess you probably couldn't, so you would probably want to do a hard money. and how quickly

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Jim Gillespie: I don't. Some hard money lenders require you to wait a couple of months before you can refinance out of them. I mean, could you try and get out of it within a month? If you yeah ours, you could? There's there's not going to be any restriction. Right? They'll get maybe a month's worth of interest, and they're making it on the fees upfront, you know. Right? Yeah.

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CAELI RIDGE: But if you have that much equity in it, then it makes complete sense. You know there may be another 11 months to get it done.

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CAELI RIDGE: Yeah, that would be your workaround to not having to wait if that were the scenario, and there was an extra bit of of cash you can get your hands on, and it didn't fall into any of the current scenarios. Go get a a short term, private money loan, and and then right in term refinance it because there is no seasoning requirement to take the Arv

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CAELI RIDGE: and simply pay off the existing lean plus whatever the new closing costs are. So if the numbers were correct, you wouldn't have to come out of pocket with anything right. It will be rolled in there. excellent, thank you, Jim. Did you? Anything else?

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CAELI RIDGE: No, no, that's it. Thank you. Thank you.

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CAELI RIDGE: okay, let me take a look at my notes. You guys, what have I not gotten into? What time is it? Okay? We got it. We're a little over. We'll we'll just finish this out. I talked about that. So

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CAELI RIDGE: you know, if you find yourself in a place, and I know this is a lot.

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CAELI RIDGE: Please keep in mind that we here at Ridge we eat and breathe and sleep this stuff. We do it all day long. It's committed to memory, and even when it is, and I have cheat sheets and and team members that I can go to and say, You know.

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CAELI RIDGE: what? What's the the newest on this thing? you guys don't have the same access that we have, and you're certainly not doing this stuff all day every day. So what I would recommend for anybody that is questioning themselves. Or did she say this, or was it this? Or I can't remember that one extra detail. It doesn't matter. Send us the scenario

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CAELI RIDGE: ideally. If you, if you really want to be slick, send us a draft closing disclosure before you sign in blood.

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CAELI RIDGE: Okay, let us see it. We want to make sure that everything is line itemized, the the way in which you envisioned it, and will maximize whatever your return and or your cash back is going to be, so that you're not leaving any money on the table. Okay? So that's what I would suggest. I would say.

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CAELI RIDGE: Send us a draft of of the CD. The scenario. Let's go through it, and then we can give you our advice. And if we see something that that sticks out that we think might be a better solution, we'll offer that up to

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CAELI RIDGE: Okay, so let's just real quickly. Let's get into non-qm. And all in one. And then if there's any trailing questions we can, we can certainly do that.

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CAELI RIDGE: So not really any change with the non. Qm, it's still 6 months.

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CAELI RIDGE: So I guess that would be another thing. If you you know, let's say none of the other things that we've talked about fit your model.

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CAELI RIDGE: Non. Qm. Hasn't made the change. We're still at 6 months to pull that cash out. Remember, on non. Qm, though, you guys are gonna have prepayment penalties. So that may not be the best outlet or resource. because they're minimum. Usually about 3 years. You can buy premium penalties out, but they're extremely expensive. Generally, it's not going to work.

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CAELI RIDGE: So you know.

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CAELI RIDGE: just keep that in mind. You're gonna have to either pay a pre-parent penalty to refinance which many of us are going to be doing come next year, maybe later this year. So there's that. And then, finally, I want to touch on the All in one.

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CAELI RIDGE: Those rules have not changed either within the seasoning. They are also still. At 6 months now I would let you know that there may be a time here in the near future. I may be announcing that they changed it, because the all in one is notorious for following Fanny, Freddy, so that that 6 months seasoning for the on one right now, given all the variables we've discussed might end up being 12 months soon.

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CAELI RIDGE: So fy on that, but one thing on the all in one that I did want to make you guys aware of a new guideline change. And this is to our advantage. Usually it's it feels like it's not so. This is kind of nice information. for those of the those of you that remember we were capped on non are occupied to 250,000 in cash back. And, to be more specific, let's say that you had

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CAELI RIDGE: a million dollar, you you you were eligible for a million dollar line of credit, but you only owed 500,000 on that line of credit

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CAELI RIDGE: you would not be able to get

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CAELI RIDGE: a million dollar line of credit. You'd get a 7 50 because we were capped at 2 50 cash out, cash back. Even if you didn't take it at closing you would only have that 2 50 on the all in one as immediate access on that line of credit, they just up that to 500,000. So, going back to my example, if your scenario allowed for a million dollar line of credit, and you only owed 500,000.

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CAELI RIDGE: That $500,000 difference of immediate access to that equity is acceptable now, but that is the cap. It used to be 2 50. Now it's 500,000. so that was, that was really good news. I was excited to hear about that?

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CAELI RIDGE:  okay, questions. Anybody have anything? that let me just talk about next week I got a couple of things I'm going to answer here.

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Karlie Libby: Carly, you can see the chats right. Will you check really quickly to see if there's any other questions that maybe I missed?

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CAELI RIDGE: Yes. Oh, good, thank you. Thank you. Okay, we'll look through. I think that I I see who my my winners are, and we're probably just because I can't. I just could never not decide. I think there'll be a few of you to get the

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CAELI RIDGE: they get the the prize. Not everybody gets a trophy, but we'll we'll hand out a few prices today.

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CAELI RIDGE: okay. So next week before I do that next week, I want to share with you guys, we're going to talk about the 10, the top 10 things not to do

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CAELI RIDGE: when getting into a mortgage, transaction, refinance, purchase whatever top 10 things not to do when getting into a mortgage transaction, and the following week will probably be the top thing. Top 10 things to do when getting into or getting ready to secure financing for real estate. Whether it's your primary or your rental, or your second home, it doesn't matter. All of them is, is all of them would be applicable

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CAELI RIDGE: And then beyond that, this is for you, Eustace. I I believe we will have another guest speaker, someone that's gonna come on that I've known for many, many years. And talk about self, directed Ira. Funding.

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CAELI RIDGE: We have outlets and avenues for this, but she is the master of all masters related to that kind of funding, as you know. If you're if you have a a self, directed Ira.

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CAELI RIDGE: it has to be non recourse. You're purchasing the investment inside that that asset class right? And those loans are quite a bit different than than other things. So she's going to come on, and I hope she'll be here. What's today? The thirteenth? It might be the I don't know when it's going to be

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CAELI RIDGE: but it'll be soon, anyway. So keep those topics. Thank you for that. That idea uses. I appreciate it so for everybody else. Anything that's come up that you're interested in. Please let us know, so that we have. We can make sure that we have our ducks in a row, and every week we've got new and fresh information to deliver to you that is relevant and timely, and and all of that stuff.

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Karlie Libby: okay, let's see, yeah, just a couple more questions about where to find the recording. So there's a few places you can find all of our recordings. Youtube, we have a Youtube page, rich lending group. everything is there as well as please join our community. ridge lending group community. Everything is posted in there. that information is going to be on our website. Ridge, lining group, community or ridge landing group.com so feel free to join there. And all of our videos are at both of those sites.

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Karlie Libby: So everything all in one, or just all recordings in general. So, you can find everything there.

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CAELI RIDGE: Thank you, Miss Carly.

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okay. So we had. We had some good participation. Today. I I really appreciate it.

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CAELI RIDGE: let's just see here. So we're gonna go, Chris, definitely. We've got Charneta.

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CAELI RIDGE: Jim.

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CAELI RIDGE: Michael.

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CAELI RIDGE: Michael, there's 2 Michaels, Michael Finnell. And then, Michael, I'm going to say it wrong.

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CAELI RIDGE: I'll I'm gonna say wrong. Just say, Alan. later. And there was somebody else that got a lot of the questions right? Where are you.

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CAELI RIDGE: Justin?

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CAELI RIDGE: If I miss anyone, you guys please keep me honest and email me and I will go back and and review.

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CAELI RIDGE: But

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CAELI RIDGE: they're all eligible for $200 off their next ridge lending group Loan. We have it written down. We'll put it in your private profile. So you get a lender credit at closing.

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CAELI RIDGE: not, I mean, like, I said, at the top of the hour it. It wasn't a huge amount or the half hour, anyway, not a huge amount. But it's really more to elicit that participation which we love you guys, and there's no dumb question, no 2 small question.

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CAELI RIDGE: really, that's what we're here for. And and we want to have that interaction. And

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CAELI RIDGE: yeah.

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CAELI RIDGE: So as always, you guys can reach us. You know our our website, ridgeline group.com toll free. 8, 5, 5, 74, ridge (855) 747-4343, and then info at Ridgelin and group.com. You can send us an email. your dedicated loan specialists are on standby as well. We are here for all your scenarios and lending needs. Let us know how we can help see you next week.

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CAELI RIDGE: Thanks for coming guys. Oh, wait! There's new messages, currently, they and most people probably jump off. Let's see if there's anything that's important.

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CAELI RIDGE: Whoo! Whoo! Okay, alright, guys, you. Okay, we'll see you. Thanks. Thanks for coming. Bye, guys. Bye.