Cash Buyers can use Delayed financing to get Cash Back

Mark Luciani
President – America One Mortgage Corporation
June 30^th, 2022

What is Delayed Financing?

Delayed financing is a mortgage method after purchasing a home using all cash.  More and more homebuyers that may have the resources are considering an all-cash offer to strengthen their offer and win a contract.  Delayed financing provides the buyer a solution to quickly obtain a cash-out refinance to mortgage their new property and get a large portion of the cash back into their savings or investment accounts for other purposes, such as:

• Liquidity in savings
• Other investments
• Renovations or Refurbishments to the new home
• Paying off other high-interest debt
• Purchasing a second home or other real estate investments

With delayed financing, you buy a home with cash, then can immediately complete a cash-out refinance to reclaim most of the money, or as much as you need, depending on guidelines or qualifications.  This method of financing helps you make a more attractive all-cash offer to home sellers, which can be helpful in a tight sellers’ market.  This gives the seller confidence that you can close fast and on time.

Cash buyers can use this method if they have bought the property within the last six months and paid in cash.  There is no waiting or seasoning period to complete the refinance and get the money back out, like some cash-out refinance loans sometimes have.  For example, if you buy a home with a mortgage, some banks will require your name on the new deed for a minimum of 6 months before you can complete a cash-out refinance on your new home.

Delayed financing is an essential tool in a real estate investor’s toolbox.  Based on the latest statistics on real estate purchases across the country, over one-third of all home purchases are now all-cash deals.  Wow!  Delayed Financing helps keep investors and homebuyers liquid so they can buy more properties or have the money for other personal financing reasons.

So, who might be Eligible for Delayed Financing?

As with any home financing, guidelines determine who can qualify for delayed financing. Some of the guidelines are typical (but not limited to) and are listed below:

• Applicants must document that they paid for the property with cash and source the funds.
• The transaction must have been an arm’s length transaction, which means you could not have purchased the home from someone you have a personal relationship with, such as a relative or employer.
• You will have to use the purchase value of the home. If you want to use a higher appraised value (such as if you bought a property for a great deal or did some rehab or additions to boost the value), you will typically have to wait six months.
• Applicants will typically have to document they have used eligible funds to purchase the home, and for any funds from a third party, a gift letter may be required from an eligible donor.
• Normal credit, income, and debt ratio qualifying will be applicable.
• The property must be free of any other liens

What About an Appraisal with a Delayed Financing Transaction?

You will typically need an appraisal for the transaction, and the property may appraise for less than the purchase price you paid. Keep this in mind so you are prepared if you did not get out as much cash as expecting and *to* avoid private mortgage insurance. 

Take Away and Bottom Line

Delayed financing is an effective tool to get a large portion of cash proceeds back if you use it to pay cash on your purchase.  It provides an opportunity to make an attractive all-cash offer on a home and still enables you to use long-term mortgage financing.  It allows you to stay liquid and maximize the benefits of purchasing real estate with cash.

Call us with your situation at 1-888-942-5626, and we can help confirm if this is the right choice for you!