How to get around the six-month rule
You generally have to wait at least six months from your closing date to cash-out refinance a rental property. But you may be able to bypass this rule and refinance within a few days if you qualify for an exemption or delayed financing.
Exemptions
- You inherited the property.
- You were granted the property in a divorce or separation order.
- You qualify for delayed financing.
Delayed financing
You must meet all of these requirements to qualify for delayed financing.
- The value of your new loan doesn’t exceed the property’s purchase price.
- You purchased the property as an “arms-length transaction,” meaning you’re not related to the seller nor did you have a personal relationship with them.
- You can prove you paid for the property in cash.
- You can prove where you got the money to pay for the property in cash — this rule is to curb money laundering.
- If you get the cash from an unsecured loan or a HELOC on another property, you agree to pay off or pay down that loan before you use the funds for anything else.
- If you get the cash as a gift, you agree not to repay the money using your cash-out refinance loan.
There are several reasons why you might want to consider applying for delayed financing sooner rather than later — the main one being that it can free up cash that you can use to renovate or reinvest in other properties.