Cash out refi rental?

Question

I have a property that has increased a large amount and I am not sure if I should do a cash out refi as the majority of our money is in the property and the rate is super low. Property could appraise around 1.2 million.

Bought for $450k

Loan: $400k

Rate: 2.99 (28 years remaining)

Current line of credit of $200k out on the property via HELCO (9% interest)

Any advice is greatly appreciated.

Zach Wain · Answer

@Chris Burke - Do you have other options to raise cash?  How much cash do you need?  The HELOC is a great option.  Losing the 2.99% rate for something in the 7%-8% range would be very painful.

Jack Tulloch · Answer

I would keep the 2.99 rate. That said, if pulling out the cash to use on your family is more important to you, then do that.

Kerry Baird · Answer

@Chris Burke, if this is your primary, you will have different options.  You can more easily get a HELOC on your own home.

If this is a rental, that will be challenging in this current environment.

Devin Peterson · Answer

Hi Chris, tough spot to be in with such a good rate. DSCR cash out for rentals will allow you to cash out up 75ltv of the property. But the rates are around 7.875%-8.

Zach Wain · Answer

I think the smart play is to keep the 2.99% loan in place.  Trippling your mortgage rate without a plan  for how that will make you more money does not add up.  If you need the equity, you need the equity, but use the HELOC first.

Chris Burke · Answer

The reason for the cash out refi is not necessarily to raise cash. It would be to take some of the built up equity and use towards our growing family.

Erik Estrada · Answer

How much are you looking to take out?

The low rate has everyone stuck, but if you are putting higher rate debt to produce you more then maybe a refinance could make sense.

If your goal is to payoff the loan then keep the low rate.

Nicholas Ruscio · Answer

Hi Chris, How long have you owned the property? For a cash out refi you would be most likely looking at rates as low as 8% with 75% LTV. In my opinion you could use that cashout to invest in other properties to offset the larger interest rate. Please feel free to DM me with any questions.

Cash out refi rental?

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