Looking to cash out Equity from rental property.

[James Burciaga]

Hello All, I'm in Texas and I'm looking to pull some equity out of a rental property.  What type of loan should I be looking at?

Home value $285k, rents for $3,000/mo.  No mortgage on the property.  Looking for $175k- 200k cash out on a long-term note 20-30 yr.

[Jay Hurst]

Quote from @James Burciaga:

Hello All, I'm in Texas and I'm looking to pull some equity out of a rental property.  What type of loan should I be looking at?

Home value $285k, rents for $3,000/mo.  No mortgage on the property.  Looking for $175k- 200k cash out on a long-term note 20-30 yr.

 Two choices:

1. A full documentation 30 year fixed conventional loan. This loan would require you prove your income with tax returns, pay stubs, W-2's etc as well as the rental income on the subject property. This will be the best rate, lowest closing costs and no pre-payment penalty option. Many big lenders will tell you cannot do this in Texas, but they are incorrect. We do it everyday. 

2. You can do a debt service coverage loan (DSCR) which will ONLY look at the rental income the property is bringing in. So, no need for paystubs, tax returns, w-2's etc. This option will have higher rates, generally higher closing costs and often with pre-payment penalties. DSCR loans are a good options IF you cannot qualify for option 1.