Cash-Out Refinance With a Private Lender in California

A private cash-out refinance replaces or adds to the debt on a property you own and gives you cash from the equity. A private lender makes the loan, secured by a deed of trust, and underwrites it mainly on the property's value, your equity and your plan for repaying it. It makes sense when you need cash or speed that a bank cannot provide, and when you have a clear path to repay or refinance on longer-term terms.

It is usually temporary financing, not a permanent one. That shapes who it fits and how to plan for it.

When a private cash-out makes sense

Borrowers typically consider a private cash-out in situations like these:

• A time-sensitive opportunity. You need capital to buy another property or fund a project and cannot wait for a bank's process.
• The property does not yet fit a bank's box. It is partly vacant, being repositioned, or has issues that must be fixed before a conventional lender will touch it.
• Income that is hard to document. You have substantial equity, but your income does not present cleanly on paper.
• A planned improvement. You intend to raise the property's value and then refinance into long-term financing.
• Bridging to a sale. You need liquidity until a property is sold.

If your property is stabilized, you have clean documentation and no deadline, a bank loan is often cheaper. We make that point in our comparison of hard money and bank financing, and we will tell you plainly when a bank is the better path.

How equity is used

Equity is the property's value minus what is owed against it. A lender looks at how much of that equity it is being asked to lend against. The more cushion remains after the new loan, the more protection the lender has, and the easier the file is to underwrite. For illustration only (hypothetical example), suppose a property is worth $2,000,000 and carries a $600,000 mortgage. You have $1,400,000 of equity. A new loan would pay off the existing mortgage and then advance the remainder, and the lender decides how much total debt the property can responsibly support based on its value and the deal.

Valuation therefore matters a lot. See how private lenders value a property for how that assessment works. Lenders will also review title, since existing liens must be paid or accounted for. Our guide to title reports for borrowers explains what they show.

Planning the exit to conventional financing

The most common exit is refinancing into a longer-term loan once the property or your profile qualifies. Work out what has to change for that to happen. Perhaps vacancies must be filled, renovations completed, income history built or entity documents cleaned up. Then work out how long that will take and give yourself a cushion.

Ask yourself: if the refinance is delayed, can I carry the payments? If the property appraises lower than I expect, does the new loan still work? A second exit, such as selling the property, is a sensible backup. Our article on exit strategies for a bridge loan covers this in depth.

Risks to weigh

• Cost. A private loan generally costs more than a bank loan. Calculate the total over your expected holding period; our guide on pricing shows how.
• Refinance risk. The balloon payment (the remaining balance due at the end of the term) comes due whether or not the next loan is ready.
• Using cash wisely. Borrowing against your equity to fund something that does not produce a return can leave you with debt and less cushion.
• Secured by your property. A deed of trust means the property is at stake if the loan is not repaid.

What to prepare

1. The property address, a description and current use.
2. A summary of existing mortgages and liens, and recent statements if available.
3. Evidence of value, such as a recent appraisal, purchase price or comparable sales.
4. Entity documents if the property is held in an LLC, trust or corporation.
5. Your intended use of the funds and your exit plan.
6. Information on rents and leases if the property produces income.

For the fuller list, see our documents page. Commercial and apartment borrowers can also review our commercial and apartment loan programs.

Our approach

We are a California licensed private money broker through the Department of Real Estate and are registered with the Nationwide Mortgage Licensing System. We review each application individually, with underwriting led by equity, capacity to make payments and exit, rather than by credit score alone. This article is general information, not legal, tax or investment advice.

To discuss a cash-out on your property, call (800) 943-1314 or start your application.