FHA Refinance: Cash Out, home equity loan, or HELOC

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FHA Refinance: Cash Out, home equity loan, or HELOC

Richelle Smith
Rental Property Investor · Chicago, IL · Member since 2015 · 6 posts · 0 votes

Hi,

I purchased a multi unit in Chicago a year ago with an FHA loan. The property is now worth $375,000 and I owe $260,000. I want to refinance out of the PMI and then pull out cash to buy another property. What is the best way to do this; refinance with cash out or refinance and get an equity loan or HELOC?

Thanks! 

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Brie SchmidtBusiness Member
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Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
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@Richelle Smith I would refinance it conventional at a 89% LTV and drop your PMI. I would then do a 90% LTV HELOC on the balance. If you need lender referrals, let me know

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  • Daniel Okon
    Investor · Minnetonka, MN · Member since 2015 · 88 posts · 8 votes
    11y
    I'm very interested to hear about this. Congrats by the way! Sounds like you are making smart moves!
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  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    11y
    If you bought prior to 2013 you can get out of the PMI just by calling your lender. It seems that your equity is high enough for that. After 2013 the FHA rules changed and now PMI stays with you for the life of the loan.
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  • Upen PatelPro Member
    Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
    11y

    @Richelle Smith

    With the equity you have you are at 69% LTV. For conventional refi, you will only get a 70% LTV on a cash-out. So you will not get any cash. You can do a refi into a new FHA loan at a higher loan amount. Maybe you do a 89% LTV FHA loan. That way your monthly MIP will drop away in 11 yr, and you will get some cash out.

    You can do a HELOC, but that's risky given the fed could increase the rate anytime.

    Upen Patel, Mortgage Banker

    Federal NMLS# 1374243

    [email protected]571-200-6180
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  • Account Closed
    investor · McDonough, GA · Member since 2015 · 230 posts · 77 votes
    11y

    @Upen Patel

    What do you mean when you say a HELOC could be risky because the fed could increase the rate? Are you saying they could raise the interest rate on the loan? I have a HELOC on my rental. The credit line has been paid off for several years. When I was using it, the interest rate would go up and down. I knew nothing about investing back then. I wasn't renting the house to anyone yet. I was living in it. Now, I'm trying to actually learn about investing. This is why I ask.

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    11y

    @Richelle Smith I would refinance it conventional at a 89% LTV and drop your PMI. I would then do a 90% LTV HELOC on the balance. If you need lender referrals, let me know

    Podcast Guest on Show #132
    Second City Real Estate4.821 Reviews
    WebsiteView Page
    1Reply
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