Question about making my current home my first rental property.
I’ve owned my house now for about 10 years . Back then , I got a mortgage for $100,900 and now owe $93,000 ( refinanced a couple times) and the home is worth about $160,000. At the time I bought the home, I was single with no kids and now I’m married with 4 children so need something bigger. So Instead of selling my current home and using the proceeds towards a down payment ,I would like to do a cash out refinance and use the money towards a down payment on another home that is big enough for all of us, and rent out my current home. I’ve ran the numbers and even with the increase in the monthly mortgage payment it will cash flow about $240 a month after the new mortgage, expenses, 5% cap-x, %5 vacancy etc.. so seems like a win win.
I guess my question is am I allowed to do a cash out refinance and use the proceeds from that to put a down payment on another home if I am intending to rent out the home I just got the cash on? I have read different information online and just want to make sure I am not committing some type of mortgage fraud. We do have enough money saved up to put 3.5% down payment on another house if we had to without the refi, and refinance my current home later, but my payments on the new home would be higher because I do not have as much cash into the down payment. Also ,the loan to value rates are lower for a rental property refi so I would like to do it before I move if possible. Can anyone give me some guidance on the best way to go about this? Ideally, we would like to find a new home that needs some work, fix it up, and after a year or two of living there refinance that one and purchase another and so on… Just wanna know the best order to go about this so I know where to get started. Thanks in advance, and really enjoying all the info biggerpockets has provided so far, and looking forward to learning everything I can from the community!!