Should I Do A Cash Out Refi On My Primary to Pay Off A Rental?

2 Replies

I am about to refinance my primary mortgage from 3.75% down to 2.875% and am considering doing a cash out refinance to pay off a rental I have with a 5.875% rate with $57k left on the mortgage. Crunching the numbers it looks like my primary mortgage payment will go up about $140 while I will drop the rental payment of $345 for a net increase in cashflow of about $200 per month. My rental is in my name and not in an LLC.

Think I should do this or just refinance the primary and drop my primary mortgage payment by $100 and leave the rental leveraged?

@Eric H. The cash out refi is the sort of creative thing that investors need to do these days to help with cashflow.  I would do it, but I would also consider using the cash out refi as a downpayment to purchase another property.  Have you considered that/ are you interested in growing your portfolio?

@Eric H. , I would do it if I thought I could get the money out of the rental again if needed. You could always refinance it or get a line of credit secured by the rental. I hate having equity sitting idle in a property, though, I'm sure others would disagree. It certainly is riskier putting your house on the line, but to me it is a simple numbers game. You are borrowing the money at 2.875% and investing it into the rental property. So what is your return on the rental? Does it make sense? Could you do better elsewhere?

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