What is a cash out refinance?

Question

Hello everyone.

As I mentioned in the post above , can someone explain to me what a cash out refinance is, and also how can I use to it to refinance a HELOC ?

If you can give me a couple of examples shored up by some numbers it would be great .

Thank you .

Steve DellaPelle · Answer

Property Value = $200,000

Outstanding Loan = $100,000

I want cash now so I do a cash-out refinance up to 85% LTV.

85% of $200,000 = $170,000

I now have a loan of $170,000...I pay off my old loan of $100,000 and now I have $70,000 left in my hand.

I hope this helps!

Zobiri Mehdi · Answer

A lot!!! , thanks 🙏

Ace Kaspar · Answer

Going to check back in and read this later. Very insightful information for sure!

John Schwartz · Answer

This is super helpful -- my question is about interest rates...

We nailed our current loan at the beginning of the pandemic (2.25%...!) with 20% down. In a hot LA market, we have seen significant appreciation. I am looking to do a cash-out refi to buy some investment properties. Will my new loan reset to the current 7.2% rate? This would obviously be a prohibitive disincentive. Thanks so much for any guidance!

John Morgan · Answer

@Zobiri Mehdi

Cash outs are great. I’ve scaled up with buying 12 rentals from cash out refis. It’s an easy way to buy properties with no out of pocket cash once you have some equity built up. I do a cash out then use the cash to buy 3 more properties with 20% down. It feels like buying houses for free. I like to use equity that’s not doing anything for me to buy more cash flowing properties.

Eliott Elias · Answer

You have an existing loan of 100k

Your property is now wort 200k

You do a cash out refinance and pull out 75% of 200k

You get 59k in your pocket after you pay off the original loan.

Etim Fisk · Answer

@Steve DellaPelle, I have never done a cash out refinance before, but I’m curious to know if a person  is required come up with the 15% down payment?  Thank you!

What is a cash out refinance?

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