Delayed Financing – Here’s How to Use Your Equity Cash to Buy a Home!
In the current real estate market, with limited inventory and multiple offers, it is often the cash buyer that wins the bid on the purchase. What if, having purchased the property, a cash out refinance option was available to pull funds from the equity of your property, for other financial use like buying another house. Cash out refinances typically require at least six months of ownership before refinancing is allowed.
However, the delayed financing exception is available for borrowers who purchased a property, within the last six months, for cash.
In order to qualify for this exception these guidelines must be met:
- It must be an arm’s–length transaction, in other words no related parties involved in the transaction.
- The borrowers must have purchased the property as a natural person, or using an eligible trust, or an LLC or partnership in which the borrower or borrowers have individual or joint ownership of 100%
- The sources of the funds for the original purchase must be documented with bank statements, personal loan documents for an unsecured or secured loan such as a home equity line of credit on another property. Usually a settlement statement is required to verify the source of funds and the completion of the transaction.
- Funds cannot be used to repay a gift.
- The loan amount can be no more than the initial purchase price plus any fees used to pay for closing costs.
A cash offer, on a purchase, is often the best option when competing to win the offer on a property. But, this ties up one’s cash. Delayed financing allows quick access to cash after the completion of the purchase transaction. Delayed financing is a good solution to both goals – win the offer, and still have the cash!