Should I refi and pull equity out of house?

Question

Hello

Hoping someone can help. I have a condo I bought in foreclosure  in 2010 that I owe $128,000 on with a 30 year fixed at 4.7 apr.  I completely remodeled it. I'm currently renting it out and I am making quite a bit of cash flow from it.

Recently a unit just like mine in my complex sold for $560,000.  I was thinking about refinancing and have been quoted 4.0 Apr.

I'm thinking rates will increase soon and prices may go down. I may not get a chance at 4.0 Apr and a possible appraisal of $560,000.

What does everyone think about a strategy of refinancing now, getting a slightly lower Apr, and  pulling some equity out of the place? Not all of the equity maybe say $150,000? That way I can use it in the future for investing.

I'm not sure if I should do it because I really like the cash flow I'm getting currently and I know that will change.

Any help is greatly appreciated.

Jeff Sprunger · Answer

I agree with Chris Mason above.  taking out $100K or so might not change you payment too much, maybe a $100+ a month or so.  upon reading your title of the post, I was thinking hell no, but with that kind of equity, I'd say go for it, carefully.  preserve as much equity and cash flow as possible.

what would you do with the money? have you already identified other deals that you can use the money for?

as brent says, that money would burn a hole in my pocket.  I'd feel obligated to spend it (I'm thinking new camero, afterall, I deserve it...right?).  so be careful!

Brent Coombs · Answer

@Andrew Torosian, that's some serious appreciation! Well done. I'd also be inclined to ask Lenders how much they would Offer you as a Line of Credit (LOC) on it. THEN, you only get charged interest (yes I know - variable) on the actual amount you withdraw. Be disciplined, and patient, and resist spending it just because it's THERE ie. wait for SOLID deal/s!

If you borrow say, $150k extra as a cash out refi, won't you be under pressure to buy something STRAIGHT AWAY - even if a "real deal" doesn't turn up soon thereafter?

Remember, leveraging your equity SOMEHOW is how you get: (drum roll)... BIGGER pockets!

Chris Mason · Answer

Given those parameters, I bet it could be set up such that your PITI is within a few dollars of being unchanged, but oh poof look at that now you have access to tens of thousands of dollars in capital.

Andrew Torosian · Answer

Thanks everyone for the advice!

Should I refi and pull equity out of house?

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