Delayed Financing

Delayed financing is a buying strategy in which you purchase a home with cash, and then immediately obtain a cash-out refinance mortgage.

Delayed financing is a powerful tool in a sellers market, and may make the difference between an offer on your dream home being accepted or declined. So how does it work?

While there has typically been a 6-month waiting period required before a buyer is eligible to refinance, certain brokers (like Long Grove Mortgage) have the resources to get the process started within 24 hours of closing. Eligible borrowers may recover up to 80% of the purchase cost, and have the opportunity to lock in a desirable interest rate.

When is this helpful?

Competitive Edge

If you are making an offer on a desirable property, you are likely competing with other prospective buyers who are also submitting offers. A cash offer is more attractive to a seller and allow you to edge out the competition.

Negotiating Power

What’s more, a cash offer on a home gives you more negotiating power. You may be able to get a better price because you are offering to pay for the home in cash as opposed to taking out a loan.

Flexibility

Delayed financing can also quickly free up equity for other expenses or investments. You can invest the funds in a 401k, or apply it to home renovations. It can be a faster and smoother alternative to securing a renovation loan (like HomeStyle or an FHA 203K).

Basic requirements

  • Purchase must have been made within 6 months of refinance (measured from the date the property was purchased to the disbursement date of the new mortgage)

  • The cash used for the original purchase must be documented

  • The new loan size may not exceed the original purchase price

  • Title search must show that no liens exist on the home

  • Proof the home sale occurred (can be achieved by providing the original Closing Disclosure document)

  • The original purchase transaction was an arms-length transaction.

  • The buyer must be:

  • a natural person

  • an eligible inter vivos revocable trust, when the buyer is both the individual establishing the trust as well as the beneficiary of the trust.

  • an eligible land trust when the borrower is the beneficiary of the land trust

  • An LLC or partnership in which the buyer(s) have an individual or joint ownership of 100%

Eligible Properties

  • 1–unit, 2–unit, 3–unit or 4–unit homes

  • Primary homes

  • Secondary homes

  • Vacation properties

  • Rental units

The Bottom Line

Delayed financing may be a powerful tool for you as you look to buy in a sellers’ market. It can also be a strategic option on a refinance. The best way to explore options is to consult with a local mortgage specialist. They can help you understand all your options and their various pros and cons specific to your unique situation. With an expert by your side, you’ll be set up to make a well informed and strategic financial decision.