Cash out Refinance guidelines?
6 Replies
David Henry
Investor from Las Vegas, Nevada
posted over 3 years ago
Hi everyone,
I'm looking at doing my first cash out refinance. I purchased the property in 2015 for 150k using a conventional loan. Zillow and Redfin think its currently worth ~200k.
I plugged their estimate into quicken loans, which indicated I would be able to cash out enough to cover all of my initial investment. Unfortunately, the increased mortgage payment would eliminate all of my cash flow. If my maintenance or vacancy costs vary significantly from my estimates then I could be in the red. This seems a bit risky, but being able to put that cash straight into the next deal is a powerful motivator...
Should I consider keeping a cashflow buffer and only withdraw a portion of the available equity? Does anyone have any rules of thumb for this?
At time of purchase I added granite counters, tile, and laminate flooring. Are those upgrades likely to tack on any extra value in the eyes of an appraiser?
Thanks!
Dave
Josh C.
Property Manager from Indianapolis, IN
replied over 3 years ago
Maybe. Just talk to a mortgage person. Also, Redfin and Zillow are as good at estimating values as Grandma. Forget them. Check sold comps. Nothing else means jack.
David Henry
Investor from Las Vegas, Nevada
replied over 3 years ago
Thanks @Josh C. Dang, they're not even usable as a rough estimate? Okay, i'll contact my lender
Sean Carroll
Investor from San Jose, CA
replied over 3 years ago
@David Henry maybe look at a HELOC instead of a cash out refi. This allows you to pay low monthly payments only while you are using the funds.
David Henry
Investor from Las Vegas, Nevada
replied over 3 years ago
Thanks Sean, a HELOC looks like it could work too. I've never bought into variable interest rate debt before though. Time for some reading.
Patsy Waldron
Rental Property Investor from Orlando, FL
replied over 3 years ago
I have found that very few banks will do a HELOC on investment properties.... Too risky for them?
Harjeet Bhatti
Lender from Chicago IL- CDLP
replied over 3 years ago
Lender do not like to go on 2nd lien for investment properties because of involve risk. Borrow as much as you need in cash out unless you have great plan which will use all the funds for next venture.
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