Delayed Financing is a refinance mortgage option for borrowers to get a mortgage loan on a home that they just purchased using all cash to close on their property.
Why would you need this?
Let’s say you found a home that you really liked but there were multiple offers on it. You want to get a mortgage on the property but you are worried that your offer may not get accepted due to a mortgage financing contingency. If you have access to capital, you can offer to purchase the property with all cash, offer a shorter escrow, and hopefully make your offer more attractive to a seller.
Once your offer is accepted by the seller, and you proceed to close on your new home you can pull cash-out immediately afterwards with delayed financing.
There are some caveats that are important to keep in mind:
First, the original purchase transaction must have been an “arms-length” transaction. That is when the buyer and seller each act in their own self-interest to get the best possible deal for themselves. A transaction is not considered an arms-length transaction when there is a sale between parent and child, friends or family members, or a sale between a trust and its beneficiaries.
Second, the original purchase transaction must be documented by a settlement statement and confirm that no mortgage financing was initially used to obtain the property. That being said, funds from an unsecured loan or a loan that was secured by an asset other than the subject property (such as a HELOC on another property) can be used. The proceeds from the delayed financing must be used to pay off or pay down the loan(s) used to purchase the property.
It is important to note that any funds received as gifts and used to purchase the property may not be reimbursed with proceeds from the new mortgage loan.
Third, the loan amount from this refinance cannot exceed the actual documented amount of the initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new loan. Let’s say you purchased the home for $100,000 but after you start the refinance on the new mortgage the appraisal comes back at $150,000, you would not be able to finance more than the $100,000 plus closing costs, prepaid fees and points.
This may sound confusing or even overwhelming but that is why we are here. Give us a call at 760-930-0569 and we can help walk you through the different mortgage options that are available to you.
