Cash Out and Refinance Lenders?

Question

I have 2 rental properties in alabama and I am thinking about doing a cash out refinance with the point being to cash out the equity to purchase a new investment property.

Any tips for this?

Alabama lenders who so this?

What sort of rates should I expect? (Currently in the 4% on both properties).

Thanks!

Robin Simon · Answer

Hi Sam

Speaking on DSCR loans, you can buy down points for interest, but your interest floor is probably going to be around 6% and maybe a bit higher, which might be a tough sell if you are currently in the 4s.  That being said, you should always run the numbers and they might surprise you, considering the big increases in rents.  You should model two scenarios: A) Status quo, how much you will make if you just keep the 2 properties with your current loans, add up the A+B properties cash flows and B) Cash-out refinance and buy a new one, add up the monthly cash flows for A+B+C

Raymond J. Rodrigues · Answer

The 100 bps increase already hit the market today with all the financial falls happening today @Simmy Ahluwalia

Simmy Ahluwalia · Answer

Like most said, I wouldn't worry about the rates right now.  I'm even seeing low-mid 7's, and we're expecting a 100 bps rate increase this week, we'll see!

Consider an I/O ARM, like a 5/1 (with little to no pre-pay penalty).  This way, you can cash-out some equity, still cash-flow your existing rentals, and then (hopefully) in 2-3 years, rates will be competitive again in the 4's/5's and you can Refi into a 30 year fixed.

Sean Ross · Answer

Expect a bit higher rates than your 4%; Rates will continue to increase for the short term.  Plenty of cash value from appreciation over the past two years.

Rates will vary on what type of loan you look for and requirements. Get your documents ready and shop around!

Chase Busick · Answer

@Sam Booth, I can't speak for specifics to the area. I'd highly recommend building relationships with many different commercial bankers if that is who you are working with for the refi's unless residential.

You can definitely build relationships with local bankers, credit unions, and mortgage brokers for commercial refinancing. The big thing is that each can be very different in what they are offering at the specific time, have different qualifications, etc.

Commercial rates right now, even some most residential can be anywhere from 5-6 % or more depending on variables like LTV, what type of loan product/note, amortization schedule, etc. I got a quote for my VA home loan and it is right in line with some commercial options. But commercial wasn't 30 year fixed. The 30 year fixed commercial from mortgage broker around last month was just over 7%.

Sam Booth · Answer

Thanks everyone for the replies, I really appreciate it and will think about all the advice given here.

Erik Browning · Answer

@Sam Booth you can most certainly do cashouts on both properties - what you do with the money after you receive it is up to you.

Everyone is right about rates. At this point in time, expect to see around the mid-6's. But also don't worry so much about the rate, it will come back down and you will have another opportunity to refinance. Worry about the monthly payment and cash flowing on the properties. Extracting the $$ out of both properties and putting into another asset will return more in the long run.

Feel free to reach out in a DM for a lender in AL

Sam Booth · Answer

Thanks for the replies!

One more question, can you buy down points on interest for both conventional loans and DSCR loans? Thanks so much

Cash Out and Refinance Lenders?

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