Pointers on getting a HELOC or Cash-Out Refi and prepping for an appraisal?

Question

Hi Folks,

I'm looking into to getting a HELOC or cash-out refi to enable my next purchase. Looking for tips on options, things to look for, potential problems, how to prepare for appraisal to get best valuation... I've done some reading and picked up some tips, but here are some details on my situation and questions. Thanks for any advice/tips you might have.

My wife and I bought a triplex in 2012 as an owner occupy for 250k. FHA loan with PMI, 3.5% down, 3.75 fixed APR. Getting a read on current market value is a little hard because there are few comps in the area but I think it has gone up enough to get above 75% LTV so I could get cash out.

Questions:

1. Currently I have moved back to a family property and have all units rented. My mortgage guy recommends I refi as owner occupy. Should I move back? Just say I live there? or proceed as non owner occupy?

2. What are top things I can/should do to get a good valuation on the appraisal? (I know that's a big topic, any tips or links to good threads on this would be great)

3. Should I be concerned about losing my 3.75 fixed APR? If it appraises at under 70% LTV  I can get out of the PMI right?

4. From what I've read a HELOC would be better option than the cash out refi if my plan is to use that money toward next buys. Anyone disagree?

Any other pointers/suggestions would be much appreciated.

Thanks

Orion Walker · Answer

Thanks for the comments @Curt Davis. The mortgage guy I'm working with so far says that based on my current loan at a little under 240k, the property would need to appraise at above $325k to pull money out (after fees). Zillow is not known for being accurate on valuations around here, but it has the property at over 600k, so I'm thinking, can Zillow really be that far off?

I've heard sprucing up the landscaping/curb appeal helps with appraisal. Wondering if I should focus on that or if there are other things that would be more important.

Anyhow, thanks for your comments.

Curt Davis · Answer

You purchased using FHA financing so what is that, 3.5% down payment? I doubt there is enough equity in the duplex to get you a heloc.  You would need a tremendous amount of equity or the duplex would need to appraise for a lot more then mortgage balance.

You do run the risk of losing the current interest rate if you refi.

Sometimes there is not much you can do to get a better appraisal, its all up to the actual appraiser and how they evaluate your place based on other duplex comps and possibly using the GRM formula if they can do that.