How does refinancing work?

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Hello everyone,

Ok, so I hear about people refinancing their properties, to get money for more properties all the time. How exactly does this work? How do I make money by refinancing? For me I'm thinking about refinancing my current house so that I may free up VA loan benits for a new peace of real estate. Are there more benefits to refinancing than just freeing up the benefits of a certain type of loan? Any and all help is appreciated. Thank you very much for your time and I hope you have a wonderful day!

If you have a home worth $200k and you owe $100k on your current mortgage, then you have $100k in equity sitting in that house. The house might appreciate, but appreciate is slow and unpredictable. So, you might be earning 1% in appreciation on that $100k in equity.

However, if you do a cash-out refi with a 75% LTV, then you can take a new loan out for $150k. You will pay off your old $100k mortgage and have $50k left over to invest in something that will hopefully yield well more than the 1% appreciation you were getting before.

If you are refinancing your primary residence, you might be able to get an 80% LTV conventional loan at a fixed rate. That is a nice thing because rates are still low but trending higher. So, the opportunity to lock in a low rate is a good thing.

We are currently trying to do the same thing with our rental property so we can use our VA laon again. The biggest thing I'm noticing is we may have to pay mortgage insurance with a conventional loan along with closing cost with the new loan. But it would free up our VA loan and give us money in our pockets for any rehab we would need to do for the next property. Have you started or finished the refinancing process yet? We are just about to get the ball rolling. Let me, maybe we can help each other out on the whole process! Have a good one.