Refinancing owner occupied property

7 Replies

So I have a 4 unit property that me and my fiancée have lived in for a year. Our plan is to refinance our fha loan into a conventional w/cash out loan. We are trying to waiting until early spring for the comps in our area to rise in turn giving a better appraisal. Our sole purpose in taking equity out is to invest in a second property (brrrr method) so if we aren’t able to get a good appraisal and enough equity to cash out, would it be better to just do a refinance and take whatever equity we can get to put toward another property or do a refi then take out a HELOC at a possible 80% ltv? Kind of at a roadblock on what we should do. We want to get rid of the pmi insurance and take out some equity. Any suggestions are welcomed. Thanks

Just want to caution that interest rates have risen since last year and are continuing to rise, so make sure you will actually see a benefit from any refinance, especially after analyzing costs involved. Make sure it's not more cost-effective to keep the low rate and just obtain a HELOC so you'll have the funds when needed, or maybe research all options and be ready to jump if mortgage rates ease back a bit in the future. My daughter bought last January and was also looking at this scenario and, for her, the higher rates have already taken away most of the benefit of refinancing right now. They are still finishing renovations so will make a decision once complete, but it has been frustrating for her seeing it rise and missing her window of opportunity.

@Remone Randolph have you tried talking to a real estate agent yet? A good one will be able to pull comps for you and give you a pretty good idea of where value is - all for free. 

I know a well respected lender in Seattle who man know some solid realtors if you do not. He would also be someone I would go to for advice on four unit refinances in the area. Let me know if you would like his info.

@Jeff Dulla Sure I will take his info thanks! I’m sure my property is btw 630-699k looking at comps in the area.
@Lynn M...My current interest rate is 3.75 so obviously way better than current rates but I was hoping to refinance and take cash out to buy another property.

Congrats on that 4 plex.  

As other posters have mentioned, you have an awesome interest rate that is unlikely to be available again soon. I don't know what your rents are vs. costs but I'm guessing from the FHA loan you may have a fairly high balance; but that may be relative to what you bought at and not what its worth now. Still, rents should be covering the vast majority of your monthly housing costs (PITI, utilities, maintenance). Hopefully that leaves you able to save a large proportion of what other income you may have (if you have one 4-plex assuming you have a job or some other income as well) That can build up pretty fast when you are able to save a large proportion of it. Pretty much 100% of my day job take-home gets saved up for either paying down RE loans or down payments on more RE. Maybe you can do similar.

The economics in Auburn may be different than a bit further north (I'm in seattle and burien)  but its fairly likely we are somewhere near the peak of the current cycle in rents and prices for investments.    It might be relatively wise to avoid leveraging more, and instead focus on building the down payment.

If your rents are below market,  make sure to look at bringing them up to speed,  possibly commensurate with some improvements to the property where they make sense and as an olive branch to the tenants you are asking more of.     Another few hundred a month will add up and possibly more importantly help a lot when it comes to qualifying for that next loan.

@Brian Hughes thanks Brian it was a great investment. Yea the interest rate we bought down at that time so we know it’ll be awhile before we get that again. Right now our rents pay the mortgage and utilities. We don’t want to over leverage but hoping to use the brrrr method and pull some money out to do another property. Values have risen substantially so appraisals should be good for refi cashout. Otherwise a HELOC may be an option

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