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?

Erik Estrada · Answer

Have you looked into a HELOC instead?

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!

Elias Halvorson · Answer

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

Mike Grudzien · Answer

Fixed rate HELOC

Rashad Ellis · Answer

1. I'm going for another property and Idon't know how a HELOC will affect my DTI compared to a refi

2. I prefer a fixed rate

3. At this point in time I prefer lump sum

Pandemic rate...cash out refi?

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