Advice on what type of loan would best fit

[Max Hutchinson]

Hi, I am looking for some advice on which type of loan I should get for my next rental investment. I currently only have one rental which I got using an FHA(duplex) theres some equity in it I want to tap into. I have a pretty good interest rate 2.9% which is why I dont think a cash out refinance would be good considering todays rates. And with a HELOC, the research I have done says its hard and very few lenders will do a HELOC on a investment property. Also fees seem quite high. I want to tap into this equity and fund my next rental. Just looking for some advice here, as I am only on my first rental and dont have a ton of experience with loans, etc.

Thanks,

[Jason Wray]

Max,

It's very hard to accept that rates are higher but its a temporary thing and they will come back down. Just do not sit on the side lines watching other investors make deals because of the fear of losing the low rate. One thing to keep in mind is although your rate will be higher you can also eliminate the FHA MIP monthly insurance if you are 80% LTV or less. The rate might go up but removing the MIP monthly will help balance and justify the need for the cash.

You also have to look at what is the cash being used for in order to evaluate that short term rate increase and figure out you basic burn rate. If your able to land a great new deal on another investment then the long term benefit should outweigh the rate increase. You can also always refinance that rate down the road when the rates adjust down. I would still consider getting a quote for the cash out refinance.

Dont forget rates are higher but you can always opt for a rate buydown to help lower the payment and keep cash flow positive.

[Eliott Elias]

Utilize DSCR lending.

[Scott E.]

You say your interest rate is pretty good at 2.9%. Sorry to break it to you, but that rate is way better than "pretty good". It is unlikely we will ever see rates that low again in our lifetime. Hang onto that loan.

A few clarifying questions to help answer your post:

-What is your current property worth?

-What is the balance on your 1st mortgage?

-How much savings to you have in the bank?

-What is the price range of the properties that you are looking at for your next rental?

[Lawrence Potts]

I'm fairly confident you can get a HELOC on your duplex you are living in because it is considered your primary residence? How many lenders have you talked to that have said you cannot get a HELOC on your current residence? Or is this information you found online?

[Kristen L Garner]

If your income will support it, I would recommend purchasing via conventional to capture the lowest rate possible. You can put down just 15% if it's a single family home. If your DTI is too high or there are qualifying issues with your income you can always purchase using a nonQM product such as DSCR. With DSCR you will qualify based on the asset rather than your finances. You do still need to have decent credit and show reserves. DSCR generally requires 20-25% down.
To determine how to utilize your equity - you could have a lender run numbers for you on both a cash out refi and a HELOC so you can weigh your options. If you provide me with the details I'd be happy to do it.

[Ben Shelbourne]

HELOC seems like your most likely path. I would leave that 2.9% for as long as you can, especially now.

Ask yourself what you can live with. The higher fees for the HELOC or missing your next Investment property and waiting.

[Darnell Lockett]

I'd encourage you to shop around @Max Hutchinson. Talk with different banks, lender and brokers. Since you want to pull equity out of your primary home, as others have suggested consider using a DSCR loan for the investment property purchase. As for taking out equity from your primary with that rate...you'd have to really think about which is more important to you. Staying at 2.9% (not likely to see that again ANYTIME soon or getting cash out. Of course if you have reserves elsewhere that could cover your down payment, that could be something to consider.

BlackSquire Mortgage

[Max Hutchinson]

thank you

[Max Hutchinson]

thank you

[Max Hutchinson]

Thank you! I currently owe 115,000 and its now worth about $180,000. I would like to pull equity from the home to use as a down payment but not sure if it makes sense to refinance with a 2.9% rate. 



Quote from @Kristen L Garner:

If your income will support it, I would recommend purchasing via conventional to capture the lowest rate possible. You can put down just 15% if it's a single family home. If your DTI is too high or there are qualifying issues with your income you can always purchase using a nonQM product such as DSCR. With DSCR you will qualify based on the asset rather than your finances. You do still need to have decent credit and show reserves. DSCR generally requires 20-25% down.
To determine how to utilize your equity - you could have a lender run numbers for you on both a cash out refi and a HELOC so you can weigh your options. If you provide me with the details I'd be happy to do it.

[Whitney Gillette]

Quote from @Max Hutchinson:

Hi, I am looking for some advice on which type of loan I should get for my next rental investment. I currently only have one rental which I got using an FHA(duplex) theres some equity in it I want to tap into. I have a pretty good interest rate 2.9% which is why I dont think a cash out refinance would be good considering todays rates. And with a HELOC, the research I have done says its hard and very few lenders will do a HELOC on a investment property. Also fees seem quite high. I want to tap into this equity and fund my next rental. Just looking for some advice here, as I am only on my first rental and dont have a ton of experience with loans, etc.

Thanks,

I'm a commercial and mortgage lender in St. Charles, MO. I'd be happy to set up a phone call or meet for coffee to discuss your options based on your specific position. We don't have any fees on our HELOCs. We cover the appraisal and title fees as well. Let me know if you'd be interested in scheduling a time to chat. I would certainly do everything in your power to hold onto that 2.9% rate. 

[Dave Skow]

@Max Hutchinson- thanks - what is the approx property value and the present loan amt on your rental duplex? you would need to have at least 25% or more equity in the property if you wanted to do a cash out refinance on the rental duplex ....if you have a 2.9% rate on it now - you likely want to keep the loan .... depending on the value and loan amt - you might consider trying a rate/ term refinance to get out of the FHA loan and onto a rental conventional loan ( rate will be much much higher though ) ....by refinancing to a conventional loan - you will be able to use the FHA loan for your next property . Do you already have a primary home ? if so - you can try getting a heloc in place on the primary home