Hi All! I'm brand new to Bigger Pockets and I'm looking for some information in this amazing community. My Fiancee and I purchased a HUD home 14 months ago to be Owner Occupants. We paid 26 for it, it appraised at 54 (before installing new kitchen, bathroom, and other upgrades.) With all that said, would a cash-out refinance be feasible in our current scenario, and if so....could the resulting cash be used to purchase another property for investment purposes? Thanks in advance :)
I believe you can do this, but only up to a certain amount of equity. The bank is likely to be very conservative with the property value and will not likely let you cash out more than 80% of the value of the property as determined by the bank. This does depend on the bank though, both rate and property value.
There may be some special restrictions for HUD homes. I don't know what if any there are. I'm sure your refinancing institution will let you know.
Just to give you some heads up. Refinancing right now is taking a long time. Most personal refinances are taking about 3 months. I just finished refinancing my personal home this week, and I started the voyage on November 15th. Your mileage may vary of course.
Also doing a cash-our refinance may freeze your ability to refinance for some time.
All of that being said, if you have a lot of equity in your house, now is a great time to refinance as rates are very low. As long as you believe you can confidently generate a return with that cash higher than your financing rate, then it's a smart play in my opinion.
Thanks for your response, John! I kind of figured it would be around 80%. Thanks again for the heads up information.
Daniel, are you still occupying the home? If so, refinancing it will be relatively easier.
Welcome to BiggerPockets!
Hey Daniel I do things a little differently. I get a mortgage line of credit , it's essentially the same as refinancing. I get 80% or the houses aprased value. But the advantage is that if I don't use it right away I don't pay interest in the available funds. And this also allows you to do an interest only loan if you chose too, I think hands down that for a property investor a mortgage line of credit is the best thing going. With the mortgage line of credit you can also shuffle. Money from your rentals income and apply it to your homes mortgages loc , home interest is not tax deductible but apparment interest is. So you can have maxed out loc on your rentals and little to no mortgage on your personal home
Hi Jon. Thanks for responding. Yes, I am still occupying the home, and we love it. Since we plan on staying here, I figured it wouldn't hurt to take out the equity so soon.
Hi Marc. Thank You for responding also! Is a Mortgage LOC the same as a HELOC? And do you know if a cash-out refinance is any easier to get than a HELOC? Or the other way around? My credit is okay, but apparently it's not great.
I was looking at doing the same thing. But from what I came up with, a cash-out refi has a few grand in costs. Where I haven't found a HELOC having as high of costs. I've been thinking of doing a Home Equity Loan as opposed to a line of credit as I think I will only take out one lump sum. But i'm open to other arguments.
A HELOC is flexible and cheap initially, but it has more risk. It can be adjusted or even called.
Right now if you get with a good experience Loan officer it shouldn't take more than 21 days after you recieve the appraisal to close on any type of conventional or Government loan.
If you're looking for cash out and the loan amount is lower than 75K I can't help you but a local bank will be your best bet Daniel. This should be a simple process.
If you have any questions let me know and I can guide you through it if you'd like as well.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing