Getting Started Question

[James Jones]

I'm new to the site and have found it to be a great resource. I have a question related to funding a down payment for my first investment properties. I have about $20k cash reserve, but rather not spend it. Instead, I have an opportunity to get a cash-out refi on my home. My mortgage guy tells me I can get roughly $37k after closing costs. My rate will go up .25% and my mortgage will go up $165 per mo. I can't do a HELOC as the note on my home has had a prior cash-out so I can only replace with another cash out.

Okay, so here's the deal. I see my equity in my home as dead money. So is it worth paying the 4k to cash-out refi and increased monthly payment to get $37-40k to put down on an investment property?  I'd still have over $100k equity in my home even after the refi.

So is this a good direction? If not, what other options would you suggest for funding a down payment. I'm not really interested in having a funding partner. Thank you.

[Wade Sikkink]

Instead of a cash out refi, you could take a straight second on your home. Not a HELOC, but a second mortgage with a fixed term and fixed payments. I've done this before. I took a second on my home to fund the down payment on an apartment building. The second was a 5 year, fixed term loan that was secured by my primary residence. I think this is a better way than a cash out refi. The rental paid down the second, which was clear in 5 years and I didn't lose any ground on my primary residence mortgage.

Good luck.