A seasoning period is how long you must own a property, or how long the current loan must be in place, before a lender will refinance it on the terms you want. It matters most for a cash-out refinance, where many lenders will not lend against a new, higher appraised value, or will not lend at all, until the seasoning period has passed.
Seasoning periods commonly run from 6 to 12 months, but they vary by lender and loan type. Some lenders ask for less or nothing at all, and lenders differ on which date starts the clock.
Here is how it plays out in a BRRRR deal. You buy a house for $120,000 in cash, spend $30,000 fixing it up, and it appraises at $200,000. Your lender offers 75% loan-to-value.
- After seasoning: the loan is based on the $200,000 appraisal. 75% of $200,000 is $150,000, which equals the $150,000 you put in, before closing costs.
- Before seasoning: a lender that uses your $120,000 purchase price instead would lend $90,000, leaving $60,000 of your cash in the deal. Some lenders also count documented rehab costs.
A common mistake is assuming you can refinance at the new value the day the rehab is finished. Ask lenders about their seasoning rules before you buy, and budget for the holding costs you will carry while you wait.