Refi primary residence for investment for payment

Private Lending & Conventional Mortgage Advice
4yFollow

Refi primary residence for investment for payment

Sean Starkey
Rental Property Investor · Huntington Beach · Member since 2021 · 116 posts · 40 votes

How many out there have refinanced their primary residence to get a down payment for their investment property? We have had our house since January of 2021. Homes around us are selling for low 900s and we have 647k remaining to pay on a conventional fixed loan. We got a great deal on the house. Do we refinance to get our down payment to start our investment journey who else did?

1Reply
65 views

Most Popular Reply

Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
4y

@Sean Starkey you won't be able to refinance any sooner than one year, most likely, but that is only a couple months away. Here are some things to be aware of:

1. You will incur new closing costs for appraisal and loan fees. That will be $2000 or more. They may let you finance into the loan, but it is still an expense.

2. Cash out refinance will probably require you to leave 20% equity in the property. Assuming $900K value, that is $720K loan amount. You are probably looking at around $70K cash out.

3. You will pay higher interest rate than a non-cash out refinance. Maybe 0.125% to 0.5% more.

4. Payment will likely go up, but depends on current rate and terms of course. At 3.8% for 30 years, $70K will cost you $325 per month.

5. Keep in mind that using a financed down payment means your rental property will be essentially 100% financed. You will need to find a good deal to make sure you are not under water each month on payment versus income. Many investment properties do not cash flow when 100% financed.

I am not trying to talk you out of doing this, but make sure you invest that $70K wisely, so it isn't just an extra monthly burden.

8Reply
See this reply in the discussion

29 Replies

Jump to latestLatest
  • Jordan Woolf
    Flipper/Rehabber · Huntsville, AL · Member since 2019 · 117 posts · 57 votes
    4y

    @Sean Starkey it was 4.25% and it was a variable rate. I will pay the heloc off once I refinance the property.

    0Reply
  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 669 posts · 536 votes
    4y

    The minimum on the last one was 50,000.  I only paid interest.

    [email protected]
    MGM Property Pros LLC
    View Page
    0Reply
  • Sean Starkey
    OP
    Rental Property Investor · Huntington Beach · Member since 2021 · 116 posts · 40 votes
    4y

    @Greg Parker

    So you only paid $400 per month in interest or altogether to take out 50k? At your 6 month mark what happens? We need to pay back the 50k right?

    0Reply
  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 669 posts · 536 votes
    4y

    Our total interest was around 460-480 at the end.  We sold the house and paid back the money.  50 was the minimum, but I believe we only used 40-45k.  50 was just the available amount.  We didn’t get it all at once.  We drew out money as we needed it to pay subs.

    [email protected]
    MGM Property Pros LLC
    View Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free