Pandemic rate...cash out refi?

Question

So my first property after reno and rented has been giving decent cashflow after expenses. Pandemic rates so I always said a refi is out of the question. However I'm back in the game trying to buy a second property. Now I'm reconsidering doing a cash out refi and use the cash for funds to reinvest. The refi calculator quote has the property still cashflowing after. Rate would almost triple but it ideally will continue to pay for itself. Any advice or thoughts?

Elias Halvorson · Answer

Go HELOC. DO NOT REFI YOUR PANDEMIC RATE! Keep it...Forever.

Erik Estrada · Answer

Have you looked into a HELOC instead?

Irv Arreola · Answer

One framing that helps: don't compare the new rate to your old rate

Compare the cost of the incremental dollars to your alternatives. If you pull $150k and your all-in payment rises $900/mo, the marginal cost of that cash may still beat a HELOC or partner capital, and unlike selling, you keep the asset and the low-basis depreciation.

Id check Two things to check before deciding: (1) run the blended rate on the whole new loan vs. keeping the old note and using a second-lien/HELOC  investment-property HELOCs exist but are LTV-limited

(2) make sure the property still debt-covers at the new payment with a cushion (1.2x+), not just breakeven, since one vacancy at breakeven means feeding it. If the 2nd property's return exceeds the marginal cost of the cash, the math says GO!  if it's close, the pandemic rate is worth protecting.

Henry Lazerow · Answer

One of my clients recently did a cash out from a past sub 3% conventional mortgage and the lender gave them $40k bonus to do the refi due to the low rate, I did not know it even existed but ask your lender. As others mentioned HELOC is also a good option if only the capital temporarily for example for a flip or brrr but the rate is adjustable so not great for long term holds.

Brittney McIntire · Answer

A HELOC makes more sense. Keep that low rate!

Joseph Scorese · Answer

That's a great problem to have—you're weighing the value of low-cost debt against the opportunity to grow your portfolio.

From my perspective as a private real estate lender, I wouldn't look at the interest rate in isolation. I'd look at the return on the capital you're pulling out.

If the equity you access allows you to acquire another property that generates strong cash flow and long-term appreciation, paying a higher rate on the new loan may still produce a much better overall return than leaving your equity idle. On the other hand, if the new deal is marginal and only works because you're stretching assumptions, I'd be hesitant to refinance a property with an exceptionally low fixed rate.

A few questions I'd ask:

• Will both properties still generate positive cash flow after all expenses and reserves?
• Is the cash-out being used to acquire a high-quality investment rather than simply increasing leverage?
• Do you have sufficient liquidity for unexpected repairs or vacancies?
• Does the new acquisition improve your overall portfolio, or just increase your debt?

You may also want to compare a conventional cash-out refinance with alternatives such as a DSCR cash-out refinance, a HELOC (if available), or financing the new acquisition with a bridge or asset-based loan and refinancing later. Sometimes preserving the original low-rate loan while using another financing strategy produces a better long-term outcome.

At the end of the day, the question isn't, "Am I giving up a 3% mortgage?" It's, "Will the equity I unlock earn a higher return than it costs me to borrow it?"

If the numbers work conservatively—and they still work with higher vacancies, repairs, and interest rates—it can be a smart way to accelerate portfolio growth.

Malik Shalmiyev · Answer

Fellow North Jersey guy here — love that you're thinking about scaling instead of just sitting on the equity.

Quick reframe on your #1 concern (how this hits DTI for property #2), because it's really the whole decision: whether you pull cash via a cash-out refi OR a second lien (HELOC/HELOAN), the new payment counts in your DTI the same way. So a 2nd lien doesn't magically protect your DTI — what it protects is your pandemic first-mortgage rate, and that's the bigger prize. Tripling the rate on your entire balance just to access equity is an expensive way to borrow when your first mortgage is that cheap.

So the cleaner structure for what you're describing:

1. Keep the pandemic first mortgage untouched.

2. Pull your lump sum with a fixed-rate closed-end second (a HELOAN) — fixed rate, lump sum, low first mortgage preserved. That hits all three of your boxes.

3. Finance property #2 on a DSCR loan. DSCR qualifies off the new property's cash flow, not your personal DTI — so the second-lien payment on this property won't box you out of the next purchase. That's the real DTI escape hatch, not the refi-vs-HELOC choice.

One thing to verify before you pull the trigger: run the blended cost. Your first at the pandemic rate + a second at today's rate can still beat a full cash-out refi at today's rate on the whole balance — but only if your remaining first-mortgage balance is large relative to the equity you're pulling. If you're pulling a lot against a small first balance, the math tightens. Have your lender show you both side by side so you're deciding on the real number.

Net: don't blow up that pandemic rate. Second lien for the cash, DSCR for the next door.

Stephanie Medellin · Answer

You have options to avoid refinancing with closed end 2nd mortgages and fixed rate HELOCs available on investment properties.

Your DTI is affected whether you do a cash out refi or a second loan.  Your new combined payment for a first and second mortgage (whether HELOC or HELOAN) will be counted just as a new payment on a first mortgage refinance.  You want to see which option results in an overall lower payment on the property.  That will depend on how large your first mortgage balance is compared to how much equity you want to borrow.

DSCR 2nd loans or HELOCs may also be an option if DTI is a concern.

Adam Zeman · Answer

If keeping that pandemic rate matters to you, don't touch the first mortgage. A cash-out refi resets your whole balance at today's rate, so you'd be paying nearly triple on the entire loan just to pull out equity. A fixed-rate home equity loan in second position gets you the lump sum you want, keeps the low first mortgage intact, and closes a lot cheaper.

On the DTI worry — if this is a rental and you're scaling, look at a DSCR loan for the next purchase. It qualifies off the property's cash flow instead of your personal debt-to-income, so the equity you pull here won't box you out of financing property #2. Usually the cleaner path for investors stacking doors.

Jared Craft · Answer

Congratulations on your first successful property, and securing a fantastic rate! Based on your goals, and current financing on the property, it sounds like a Home Equity Loan would be the best fit here. It takes the second lien position and gives you access to the equity in a lump sum, at a fixed rate, while preserving the great low rate on your first mortgage. Closing costs are also significantly cheaper than a cash-out refinance, and there is less paperwork involved. Feel free to reach out any time if you need help structuring a deal, or reviewing all available financing options!

Pandemic rate...cash out refi?

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