Refinance Timing

[deadwing]

I have been putting off refinancing... but I know it's something I should do. 

I'm also very close to signing a contract to begin a home improvement project.  I will be paying for this project out of my savings.  So this means there will be a lot of cash leaving my bank accounts over the next couple of months.

Can I refinance while doing this project?  I remember having to defend a $10 deposit from a mail-in-rebate on my first mortgage.  I can only imagine the red flags spending tens of thousands of dollars would put up -- unless the refinance is less stringent?  If it's a bad idea to do these concurrently, how long after the last payment for the project should I wait to refi?

I estimate my current LTV is around 55%.  I assume my project will increase my home value slightly, which would decrease the LTV.  I'm guessing this doesn't play into the timing decision much, but I thought I should mention it.

[simpsongal]

I don't think we needed to provide anything re: bank statements and assets for a refinance. Just pay stubs and tax returns (I think???). I'll wait for others to weigh in, but I don't think it'll be an issue. I don't think paying for renos w/cash would affect your credit either, which is the only way I could see this being an issue.

[flygirl]

I think as long as you can show that you have enough money to pay for any closing costs and taxes/insurance they likely won’t care-but I’d be upfront and say that the money in X account is going toward a home project.

[Susie]

With your LTV %, I think it should be fine, especially since you will be able to document where all the money is going.

I'm in escrow for a purchase, so also going through the mortgage approval process, and generally I am finding that various items (e.g. my K-1 status as opposed to W-2) mean I need a longer or more detailed paper trail, but it doesn't preclude anything I'm trying to accomplish as long as I am willing & able to document, document, document.

I've had to show extra bank statements for things like, I used to keep my e-fund in CIBC, but moved it in December to Capital One.  Before getting the commitment, I had to provide further back statements (more months than previously requested) just so they could see that I'd had the money all along.

[deadwing]

Thanks for the advice!

[janegold]

We definitely had to provide proof of assets for the refi we are about to close! It might depend on the bank and the loan amount.

If so, I think you could probably explain this up front with your loan officer who could help advise as to how to present the information for underwriting.

[RockNVoll]

I would ask a lender about this. I'm not sure how they would do the appraisal if you're mid-project during the refi. We had to have some siding work done to our exterior and unfortunately they started tearing down pieces mere hours before the appraiser showed up for our refi. The appraiser said it was obvious the work was going to get completed and he would word his report as favorably as possible to hopefully avoid any issues, but ultimately it was the bank's choice whether they would want proof of completion (i.e., send the appraiser back out) before closing.

Your work will be far more extensive than ours so I would definitely check with whatever lender you intend to use before proceeding.

[deadwing]

Apr 16, 2021 11:37:35 GMT -5 RockNVoll said:

I would ask a lender about this. I'm not sure how they would do the appraisal if you're mid-project during the refi. We had to have some siding work done to our exterior and unfortunately they started tearing down pieces mere hours before the appraiser showed up for our refi. The appraiser said it was obvious the work was going to get completed and he would word his report as favorably as possible to hopefully avoid any issues, but ultimately it was the bank's choice whether they would want proof of completion (i.e., send the appraiser back out) before closing.

Your work will be far more extensive than ours so I would definitely check with whatever lender you intend to use before proceeding.

This is a very good point.  However, I'm not sure what I said to make you think my project is "far more extensive" than what you've done.  My project is building a nice patio with a cedar pergola and a natural gas fire pit.  The only work required inside my house is to plumb a new gas line in to my existing plumbing.  My understanding is this type of project doesn't increase the home value much.  I don't know how much it could decrease my appraisal value if the appraiser were to come here while they are excavating part of my yard to build the foundation.  The yard would be less appealing/functional, but the home would still be habitable.  It's definitely something to consider.

I have no problem being up front with my lender about my intent to move forward with the project and it's impact on my savings.

[tealblue]

We refinanced under similar circumstances without any issue. We were also working on a patio, and it began to snow before the concrete team could pour the patio and that was delayed until spring. So that was unfinished and we had ripped off a deck as well.

Our appraiser had no issue with this and no one asked me about anything in my bank account (we had paid for some retaining wall work).

[RockNVoll]

Apr 16, 2021 12:36:07 GMT -5 deadwing said:

Apr 16, 2021 11:37:35 GMT -5 RockNVoll said:

I would ask a lender about this. I'm not sure how they would do the appraisal if you're mid-project during the refi. We had to have some siding work done to our exterior and unfortunately they started tearing down pieces mere hours before the appraiser showed up for our refi. The appraiser said it was obvious the work was going to get completed and he would word his report as favorably as possible to hopefully avoid any issues, but ultimately it was the bank's choice whether they would want proof of completion (i.e., send the appraiser back out) before closing.

Your work will be far more extensive than ours so I would definitely check with whatever lender you intend to use before proceeding.

This is a very good point.  However, I'm not sure what I said to make you think my project is "far more extensive" than what you've done.  My project is building a nice patio with a cedar pergola and a natural gas fire pit.  The only work required inside my house is to plumb a new gas line in to my existing plumbing.  My understanding is this type of project doesn't increase the home value much.  I don't know how much it could decrease my appraisal value if the appraiser were to come here while they are excavating part of my yard to build the foundation.  The yard would be less appealing/functional, but the home would still be habitable.  It's definitely something to consider.

I have no problem being up front with my lender about my intent to move forward with the project and it's impact on my savings.

I made an assumption based on the "tens of thousands of dollars" part of your OP.  My project was just replacing some warped siding panels from a relatively small section of the house and the contractor was actively working on it when the appraiser came but it wasn't a no-brainer that it wouldn't be an issue for the bank.  That's just one data point, but thought you might want to check before you embark on something that could affect your process.  Hopefully it's a non-issue, particularly since you're not doing something to the house itself.