Cash Out Refinance Rates, Amortization, and Strategies in Texas

8 Replies

I am about to conduct a cash out refinance on a rental property in the state of Texas. The property has a note on it for 61k, I plan to put a new note on the property for around 100k to replace the old note when I conduct the cash out refinance. I have been offered a cash out refinance in the state of Texas for a fixed rate of 5.75% for the first 5 years, adjusting to WSJP + 1.5% every 5 years thereafter with a 20 year amortization schedule.

First question is this, how do these rates look to other Texas rental property investors? Does this rate look high to you?

My next question is this, should I maximize the benefits of this cash out refinance by pulling out as much cash as possible on this property if it does not impact the interest rate? I have several other rental properties that have a pretty good interest rate on them currently as well as a fair amount of equity. If I continue investing in real estate, I believe it would be advantageous to have an extra 10k in cash loaned at an interest rate of 5.75 amortized over 20 years for use in down payments and rehab costs even if it were to hurt the cash flow on just this one property a little when the other properties are cash flowing very well. What does everyone think?

Originally posted by @Forrest Holden :

I am about to conduct a cash out refinance on a rental property in the state of Texas. The property has a note on it for 61k, I plan to put a new note on the property for around 100k to replace the old note when I conduct the cash out refinance. I have been offered a cash out refinance in the state of Texas for a fixed rate of 5.75% for the first 5 years, adjusting to WSJP + 1.5% every 5 years thereafter with a 20 year amortization schedule.

First question is this, how do these rates look to other Texas rental property investors? Does this rate look high to you?

My next question is this, should I maximize the benefits of this cash out refinance by pulling out as much cash as possible on this property if it does not impact the interest rate? I have several other rental properties that have a pretty good interest rate on them currently as well as a fair amount of equity. If I continue investing in real estate, I believe it would be advantageous to have an extra 10k in cash loaned at an interest rate of 5.75 amortized over 20 years for use in down payments and rehab costs even if it were to hurt the cash flow on just this one property a little when the other properties are cash flowing very well. What does everyone think?

In an LLC? or personal non owner occupied?

I am trying to get a cash out refinance loan done right now  and I think we are at 4.25 (although rates have come up a bit since we locked) 30year, fully amortizing fixed rate loan, doing from memory but I think that is paying one point (or about there).  That is in Dallas Tx, I don't know if there is much difference in rates across the state.

Hope it helps.

Personal non-owner occupied. In San Angelo, the rates seem to be 1% higher on investment properties than everywhere else, thought I could be mistaken, this has been my personal experience. This mortgage broker is able to do 85% LTV though, which is outstanding for a rental with just a 1% origination fee. How much juice are you trying to squeeze out of that orange, are you gonna max out your equity cash out in order to do further investing?

@Forrest Holden the typical conventional rate for a cash out loan in Texas is right at 5% on a 30 year fixed rate.  You would be limited to 75% of the value of the property with a cash out loan.  If you wanted to go higher you would need to go through a "portfolio" or "commercial" type of loan...which would carry those 20 year amortization, Adjustable Rate loans.  I would also love to hear which lender is offering 85%.  I have never heard of a lender in Texas offering over 80% on an investment property.  Would you mind sharing?

@Bart H. it sounded like the rate you were quoted was on your primary home for a cash out, was that the case?

Originally posted by @Andrew Postell :

@Forrest Holden the typical conventional rate for a cash out loan in Texas is right at 5% on a 30 year fixed rate.  You would be limited to 75% of the value of the property with a cash out loan.  If you wanted to go higher you would need to go through a "portfolio" or "commercial" type of loan...which would carry those 20 year amortization, Adjustable Rate loans.  I would also love to hear which lender is offering 85%.  I have never heard of a lender in Texas offering over 80% on an investment property.  Would you mind sharing?

@Bart Hedgcock it sounded like the rate you were quoted was on your primary home for a cash out, was that the case?

 Nope, non owner occupied.  Like I said this loan has been in the works for a few weeks, and I believe rates have gone up since we locked, we are having some headaches with the appraiser/appraisal.  

@Bart H. would certainly love to know which bank that was.  That would be a great bank to know about here locally.

Originally posted by @Andrew Postell :

@Bart Hedgcock would certainly love to know which bank that was.  That would be a great bank to know about here locally.

 I sent  a note to your inbox

Hi,
I too am interested in knowing what bank lends that much. I will be going into wholesaling soon, me and my partner still have a couple of connections we need to make before finding our first deals!

I got the lending from Sonora Bank by referral from an accountant. The San Angelo Real Estate Market is peculiar and I'm not sure if they offered the 85% LTV as a result in a recent yet likely temporary dip in property values, property value growth potential, or, to trap me in a loan so that I can't refinance into something cheaper haha, at least in the short term.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here