2nd home financing - Jumbo vs conventional (Lose my cash)

[Kyle Smith]

Hello,

I'm unsure how to finance my new cabin construction loan.  I have two choices, a conventional 2nd home construction to perm loan through Fannie Freddie.  The max loan amount is $625,000 (I will need to bring $88,000 to close)  This will eat up nearly all my cash but I will get the better rate and a lock for 12 months, plus the peace of mind of a one time closing.  

2nd option is a Jumbo construction loan to perm.  The jumbo loan will not have a locked rate and I will be taking a chance the rate will be 1-2 points higher at closing next year.  I will also have two closings vs one.  With a jumbo loan I will be able to retain $80,000 for future investments and help with the down payment of my next cabin.

If I went the conventional loan route, would I be able to cash out refinance at closing or would I have to wait 6 months?  Is the additional cash out refinance cost going to be worth it?  The closing costs along could be 8-10k I think.

I think I know what Robert Kiyosaki would say..."save your cash and use other peoples money!".  However, there is some peace of mind in the conventional loan knowing I am locked into a rate.  We all know rates are going to have to go up next year.  Also, I would be financing less and I'll have better cash flow with the conventional. 

My dilemma is I want to scale quickly and without cash its going to be difficult.

Your thoughts?

Thanks in advance.

[John Underwood]

I would pick 2nd option and preserve cash. Interest rates are going to still be at historic lowes and your renters will be paying for this anyway.

This allows you to have cash for the next property. I like having long term rentals to. Don't put all your eggs in one basket.