Some experienced Orange County real estate investors used this free and clear rental property as collateral for an 80% LTV cash-out hard money bridge loan through First Capital Trust Deeds.
Usually, when we do cash-out refinances on free and clear properties, the trust deed investor(s) will limit the Loan-To-Value (LTV) to 65% of the purchase price if the purchase had recently closed or against the as-is value. However, when the clients have a successful track record borrowing from and repaying the trust deed investor over and over again, the lender can sometimes deviate from their 65% LTV threshold on cash-out loans and do an 80% LTV cash-out hard money bridge loan.
In this case, that made sense. The borrowers paid cash to buy the property because they had the money at the time. Two months later, another fix and flip property became available for purchase so they pulled money out of our subject property to buy the other home. This happens all the time with house flippers who are constantly turning over properties and recycling profits into new purchases. They often use their free and clear properties as collateral for short-term bridge loans.
The lender in this case had made several loans to this borrower and knew they’d be fixing and flipping the property, most likely clearing a sizable profit of $75,000+ within 5-6 months, paying off the loan upon sale. To the lender, going to 80% LTV on this refinance was considered the same as going to 80% LTV of the purchase price for this borrower, since it was a two month old recent acquisition. Usually, though, these loans capped at 65% LTV on cash-out refinances. This was an extra-ordinary situation where the borrowers had a great track record with this particular lender so it made sense going up to 80% LTV.
80% LTV Cash-Out Hard Money Bridge Loan Terms:
- $395,000 Loan Amount
- 11.00% Interest-Only
- $3.620Month Payment
- 12-Month Term
- No Prepayment Penalty