Cash Out Refinance On Investment Properties

6 Replies

I saw a lender's Cash-out refinance and their financing deals were 80%LTV minimum credit score 580 Loan amounts from $25K-2.5milli

Residential up to 4 units and Intrest rates from 7-13% depending on your credit. Is this a good finance deal on a Cash Out Refi?

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@Delmas Edwards this isn't a regular cash out refi, this is a Subprime solicitation that will be filled fees, and unexpected cost. The clear signs are accepting credit scores as low as 580, and rates between 7-13% which are far higher than current market rates. This is targeted for someone who's uniformed or in a tight situation and this is their only resort to access cash, Do your research, you'll find better options are available

We work with over 110 lenders and I don't know any that would do 80%LTV cash out. And they certainly won't do it with a 580 FICO. This sounds like a teaser to draw you in.

Typical subprime cash out refi would be 70-75% LTV and minimum FICO of 620 but most will want a mid score of 660 or higher. Rates between 6.5 - 8.75%

I've got another scenario I'd like to hear thoughts on.

* Current investment property with a 3.875% interest rate

* After doing an appraisal and working through the numbers it looks like I could pull out $125K

* However the investment property currently pulls in $2,500 in monthly rent but the new mortgage (plus insurance, taxes and common charges) will be nearly $2,977 (new interest rate is 4.25%).

* Does it make sense to do a cashout refi if I can take that $125K buy another property and cash flow >=$478/month. That way you are positive by one dollar and have 2 assets that can appreciate over time? Is that the only case where it would make sense?

Would love to get your thoughts

Originally posted by @Je C. :

I've got another scenario I'd like to hear thoughts on.

* Current investment property with a 3.875% interest rate

* After doing an appraisal and working through the numbers it looks like I could pull out $125K

* However the investment property currently pulls in $2,500 in monthly rent but the new mortgage (plus insurance, taxes and common charges) will be nearly $2,977 (new interest rate is 4.25%).

* Does it make sense to do a cashout refi if I can take that $125K buy another property and cash flow >=$478/month. That way you are positive by one dollar and have 2 assets that can appreciate over time? Is that the only case where it would make sense?

Would love to get your thoughts

That seems like a terrible idea. I would not want to own 2 properties combined that cash flow $1 a month in the hopes they might appreciate. Don't do that please.

Of course not, but my point is that if you can (at a minimum) break even on both and increase rents over time then it might make sense. The idea use equity build up to buy another property that can generate cash flow and appreciate overtime rather than leaving the money locked into one property.

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