Replacing Low Interest Bank Loan w/ Asset Based Loan to Pull Cash

2 Replies

Hello BP World.

The answer to my question today is going to be more oppinion base than anything, but I woul like to hear what people have to say.

I bought my primary residence as a project, knowing I would either sell it or rent it out but never intended it to be the house of my dreams. I probablly have 150k in equity in the home but cannot qualify for a bank loan since I am a new commercial broker and don't have enough income. I can however refinance the home with an asset based loan and pull about 75k out of it while having my payments land around 3/4 of what the rents would be. That 1/4 would be about $450. Of course the asset based loan, which does not have income requirement for me as an owner, will cost about 3% more in interest plus a couple points.

So, Of course this loan is expensive however, my other options are to wait two years, or sell it and get all the capital back but no longer hold the asset.

So my question is: What would you do?

Thanks all.

Best Regards,

@Jameson Sullivan - What is the rate of the loan and what kind of return can you get investing the money?

If the new loan is going to cost you $1000 more a month and investing the $75k will bring you an additional $1500 then great.  If you reverse those numbers, not great.

Also look into how you can get a loan on the second property.  If they can't use your income to qualify you for the one you already have they won't be able to use it on a new one

@Brie Schmidt

I mean its not quite as simple as just making more cash every month, there are other factors to consider to get to actual ROI. Really the question is " is it worth paying 6.5% on money that I am currently only paying 3.625% on in order to be able to acquire another asset?"

Leveraging the money I could easily make returns higher than the delta but there are also giant downfalls to the asset based loans like high fees, prepayment penalties, my first born child, etc, etc. Early on in my career it seems like something that would be worth it because if I am able to access the capital I would have no need to sell the asset and wouldn't really need to even worry about prepayment and such.

And to get the second property I would invest with a couple other investors or take another secondary asset-based loan.

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