Refinancing

Refinancing means paying off the current loan with a new one, most often to get a different rate, term or balance. With a rate-and-term refinance, the amount owed stays about where it was. A cash-out refinance increases it and returns the difference. BRRRR uses the cash-out kind to convert a short-term loan and your cash into a long-term mortgage.

The refinance costs money: points, appraisal, title and lender fees, typically 2 to 4% of the new loan, paid from the proceeds. On a $375,000 loan that is about $11,250, which comes out of the cash returned.

Timing is governed by seasoning. Conventional lenders generally require six months of ownership before a cash-out refinance on appraised value; some DSCR and portfolio lenders lend on appraised value sooner. Rates are whatever the market offers on the day, which is a risk the BRRRR investor carries between purchase and refinance that a turnkey buyer does not.