Perpetual cash out refi strategy?

Question

Hello all - wondering how long I should hold my property for, as this will dictate what terms I choose for refi. I have the option of slightly lower (2.875%) interest rate but higher upfront one-time fees versus higher interest (3%) with lower fees. I did the math, and the break even is around 4.5 years. What advice would y’all give in terms of how long to hold a property? I currently live in it but was planning on making it a rental in the future if I move and it doesn’t make sense to sell.

Have any of y’all done cash out refinances over and over on a property? Figured it’s going to be hard to get a meaningfully better rate next time I want to refi, but perhaps still worth it to take cash out to go invest either in more real estate or the stock market.

Thanks in advance!

Daniel

Thanks in advance!

Daniel

Account Closed · Answer

Thank you for the response and feedback Caroline, much appreciated!  I am not sure I follow why I should do a cash out refi with no points now, then do another refi 6 months later?  Will a lender allow this, and won’t I be paying points and costs on the second refi?  Based on the loan documents, even if I don’t pay any underwriting fees, it seems there are unavoidable costs each time like title insurance fees, HOA refi fee, etc.?

The rationale I had to keep cash out refinancing was so I can pull money out to do more deals/investing - effectively borrowing at the lower interest rate that I otherwise couldn’t get from another loan that wasn’t collateralized by my house.  Thoughts?

Best,

Daniel

Patrick M O'Neal · Answer

This idea is based solely on the expectation that your property will appreciate over time. Refinancing isn’t cheap and I feel like this is not a feasible idea.

Caroline Gerardo · Answer

Avoid paying points if possible, this leaves you open to options and not handcuffed to a loan. "Refi over and over" is not a long term investment plan, it's a sweet way to make me wealthy that's all. Cash out refi has added costs that no cash out does not.  Do a cash out refi- no points wait 6 months and refi into your long term no cash out and leave it alone. Escrow or attorney costs wildly vary so get someone to do your loan who negotiates all the and a and a junk costs way down. Rate is not the only item to compare.