Cashout Refi, second mortgage or HELOC

2 Replies

Hi Everyone,

I've finally found a property I like  and it's going to be my first rehab.

I have 60% of the $$ and I want to borrow against my primary residence for the other 40% and cost of rehab.

I'm torn between all my options.  My current mortgage is at 3.75% and the lender has given me four options; 

- cashout refi up to $417K loan

- HELOC

- second mortgage

- second mortgage + HELOC combo

- cashout refi + HELOC combo for upto 95% loan to value - this is what he is recommending

He's quoting me a cashout refi @4% with roughly $4K in closing cost or 4.125% with lender credit of $2876 and 5.26% APR on HELOC with $450 loan fees. with this option, I could potentially get up to $150K, if the appraisal value comes back close to what my agent estimated my house to be worth.

I'm a bit hesitant with this option, because it will raise the interest rate on my primary residence mortgage by potentially 0.25 - 0.325% 

I'd prefer a second mortgage + HELOC for 95% loan to value, but his company does not offer second mortgate + HELOC. He's referred me to KeyBank for second mortgage + HELOC

Here are the specs on the rehab

- purchase price $110K

- property taxes $6K

- rehab cost roughly $40K

- resale value $210K

Without getting into a lot of details I personally wouldn't mess with increasing your primary first mortgage rate even if it only a .25% . I would leave that and get a HELOC and use against that and payback as needed.

Just my 2 cents.