Trying to better understand the refinance process. By refinancing current loan to pull out equity, “owe 85k, valued around 140k” am I refinancing up to 75% of the available equity or the appraised value..? If I pull that capital back out how would that make my payment decrease, potentially as I have read..? I also have a rental that is currently paid for valued at 120k, would this be the better option to leverage against..?
@Andrew Postell - perhaps he can help answer your question.
@Jameson Gowin Hello. If you have a credit union you work with, go talk to their loan officer. They will probably get you a better loan because they might keep in house. Good luck!!
The question is are you refinancing at a lower rate? and yes the free and clear property is in a better position to leverage.
Here you go:
$140,000 x 75% LTV = $105,000 - $85,000 = $20,000 cash out. (Minus closing costs)
New Balance for your new loan $105,000.
$85 K @ 5% = $456.30 ... @ 6.0% = $510
$105 K @ 5% = $563.66 ... @ 4.5% = $532
$120,000 x 75% LTV = $90,000 cash out. (Minus closing costs)
New Balance for your new loan $90,000.
$90 K @ 5% = $483
@Guifre Mora ..ahh, great bit of info. Thanks for breaking that down.
@Jameson Gowin thanks for posting. As mentioned above this COULD lower your payment...or COULD increase your payment. It just depends on what your current loan payment is. Any time we leverage our properties we must weigh the benefit to pulling the equity out. Meaning, can you take that money and go make MORE money with it? As in, buying another property? Then maybe it makes sense to have a little higher payment if you can make more money. If you are using that equity to go to Tahiti...well, maybe that's not really the right purpose for tapping a business asset. We want to use our business assets for business purposes.
Now, along the lines of "is it better to use my other property"...again, this is ENTIRELY dependent on what you are trying to accomplish. Are you looking to flip next? Buy and Hold? How do you normally acquire properties, etc. Maybe a Line of Credit is a better purpose for that property? Lot's to consider for sure.
@Andrew Postell hey, thanks for the reply. As much as I wish Tahiti was upcoming sadly it's not lol..we are needing to do a few minor repairs for both houses and potentially make an offer on a other property that we know is coming up for sale "family deal". But having one already paid off gives us a bit of anxiety borrowing against it, where as the other property w a mortgage at 5% rate and good ARV is an option, but we have been trying to learn if finding an available Heloc on investment properties would be a smart move or not. Honestly, trying to better understand the options and decide what's best for our future can be overwhelming.
@Jameson Gowin yeah, it can be challenging to know what the right thing to do is. Especially when you have multiple goals and multiple options. The forum probably isn't the absolutely best place to talk through every personal thing too. Certainly open to discussing this via PM or phone if you would like. Here to help.