Refinance: Simultaneous conventional and HELOC??

Question

Hi Everyone! I’m looking to refinance my duplex. I’ve got to get this monthlY payment down to create more cash flow - I like the idea of a HELOC -  My broker is suggesting I refinance to conventional and take out a HELOC Simultaneously -

My goal is to decrease the original mortgage payment and use some of the equity to purchase another home.

Any words of wisdom and experience are appreciated :)

Matt Devincenzo · Answer

Is this OO and you're staying an additional year for your new occupancy provision, or NOO and you're getting investor rates/terms?

Overall I think you're probably right at that refi point with minimal if any HELOC/Cash-out. MFR rate and term refi LTV is 75% which on your 305K value is a new loan of only 229K +/-, which means you are coming to closing with 13K to reduce the loan balance. Unless your broker is saying by doing the simultaneous HELOC he would be trying to get an 80% LTV for an OO duplex. Your new 1st position mortgage would be at say 70% LTV (213K +/-) and then the 2nd would be for an additional 10% (30K +/-), which allows you to eliminate the MIP etc.

Jaron Walling · Answer

@Symone Gordon I agree with @Matt Devincenzo , you already have a good rate and you won't get much lower with a ReFi. The only issue you have equity. A ReFi for $305K, @ 80% LTV (max I've seen), yields a loan of $244K. You owe $242K, add in the closing costs, fees, etc. and you're getting nothing in return for the next deal.

Symone Gordon · Answer

@Matt Devincenzo     We would consider OO for an additional year - It truly depends on which deal allows us to lower the monthly while taking cash to buy another property.

My broker is saying: Refi, we can stay under 80% and use the rest with a HELOC but with cash out, we’d hit 80%.

I’m still learning my way about so I want to accomplish the above but not flip myself upside down by not being selective.

Symone Gordon · Answer

Hi @Jaron Walling…

Purchased in January

Worth: $305K

Owe: $242K

%: 3.75

FHA with DPA

I want to get rid of the MIP, lower the interest rate, and purchase another one.

Jaron Walling · Answer

@Symone Gordon What's the property worth and what do you owe? What's your interest rate? Now is not the time to get leveraged to the hills. Real estate prices and speculations have been on a rollercoaster ride. Don't get caught out on a downward slope if something major happens in our markets.

If you can lock a lower interest rate, get a smaller payment in the process, and keep the debt similar that's a win-win. A cash-out ReFi is what you after but again it depends on added value and market appreciation. In this situation I see the HELOC as unnecessary risk, but I'm a conservative investor. Cheers.

Refinance: Simultaneous conventional and HELOC??

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