Where did my Equity go during my FHA REFI!!

Question

I currently have a fha loan on a two-family. I plan on refi to drop the fha loan and as well as PMI. The LTV ($162,000-$235,000) = $73,000. Since it is a multi I’m told I’m only able to tAke 75% of the LTV ($73,000x.75) = $54,750. My question going forward is where does that remaining $54,750 go? Is the equity not great enough to do a cash out refi. I was hoping to use that money to continue on with my investing. It seems as though im missing something. Please if im incorrect or missing something regarding this process let me know!!

Bill B. · Answer

Your “value” in your example is $235k.

A 75% loan to value would be a loan for $176,250.

Since your current loan is for $162,000 (you’re currently at 69% ltv)

You only have access to $14k with a cash out refi.

If your lender didn’t know or could explain this, time to move on.

Thomas J. Clifford · Answer

I needed the same breakdown too Derek. I caught myself operating from a BRRRR standpoint (which seems to mostly operate on buying the property full in cash), and was making the assumption that somehow, somewhere, I was at 100% equity in my own home. Felt embarrassingly silly for not realizing that the remaining balance on my CURRENT loan still had to be paid off by the majority of that refi cash-out!Just curious - have you read the "No and Low Money Down" book yet? That's next on my list to see about other ways to pay for my first property, and wondered if you recommended it.T.

Derek Hebert · Answer

@Thomas J. Clifford

That was the first book i purchased, as you can see I’m a newbie and am still learning each day. I did enjoy that book and go back to it now and then to better my understanding on certain things. Im currently reading BRRRR by David Greene, that is the path I’m going down and its seems to be in-depth on the exact steps in order to achieve the brrrr system.

Bill B. · Answer

@Derek Hebert

No problem.

Derek Hebert · Answer

@Bill Brandt i believe i just wasn’t asking the right question, or in the right context. Thanks for clearing that up for me 👍🏼

Where did my Equity go during my FHA REFI!!

Most Popular Reply