Hello, Happy Memorial weekend!
So I understand that in order to buy the next investment property, refinancing is a great strategy. I hear that if the property appreciates, yada yada ... you can pull money out and use it to invest on more properties. The part that I need more enlightening is what happens to the new loan of that rental property after you refinance? The upside of refinancing is you get money out, but what is the downside? Is the mortgage higher? Do you have to pay the house on a longer term? Lastly, how soon can I refinance (pretend the house appreciates a good amount in a year).
Also just out of curiosity, why do banks give you huge amount of cash when you refinance? how does it benefit them?
Lots of questions there. Hope to hear some great responses :)
Your payment will likely be higher and depending on how old the current mortgage is your rate could be higher
Banks lend on the appraised value. So if the value goes up you can pull out money. Plus any equity buildup you’ve gained by paying on the current mortgage.
You should be able to refinance after a year but be aware there are some fees that will need to be paid out of pocket to complete the process.
If it helps you pull out enough cash to make a down payment for another property I say go for it.