South Amboy, NJ · Member since 2014 · 114 posts · 2 votes
What can you do if you have 2 properties pad off and worth about 250 k each . I'm not talking about selling them either. Is there a way you can borrow money off them to put a down payment on another property ? Is that what refi is..?
Yes, that is basically what a refinance is. Awesome work having 2 properties paid off and valued at $500k combined!
You have a few options, and you will be best fit to talk to your local broker so he can evaluate your credit and income profile.
You can either take the cash out in a lump sum on fixed terms, or apply for a HELOC(Home Equity Line of Credit) which functions more like a credit card.
In either case, you will likely only be able to borrow up to 75% of the value, which in your case is ~$187,500 for each property.
Yes, that is basically what a refinance is. Awesome work having 2 properties paid off and valued at $500k combined!
You have a few options, and you will be best fit to talk to your local broker so he can evaluate your credit and income profile.
You can either take the cash out in a lump sum on fixed terms, or apply for a HELOC(Home Equity Line of Credit) which functions more like a credit card.
In either case, you will likely only be able to borrow up to 75% of the value, which in your case is ~$187,500 for each property.
@Joseph Tarallo , I agree with @Scott Swink , another path that I just recently did was get a line of credit opened on one or both of them to borrow on them for more purchases. This way you are not paying interest on them until you draw out the money.
@Joseph Tarallo , it varies, mine is set for 3 years at 6% if I recall right. Mine can be used like a check, I have sent wires against it. I plan to refinance the properties I buy, but if I see a great deal I can buy it without even calling my banker. Cash in hand can be very helpful in some situations.
okay I'm just not familiar with getting a refi or line of credit. Idk if it makes more sense to get a conventional mortgage or use the equity in the house. Interest rates are pretty low right now still so I guess I have the option.
A HELOC (or Prime Equity LOC to be semantically correct when it involves a rental as @Chris Martin has pointed out elsewhere) will have its adjustable interest rate pegged to either Treasury or LIBOR. Typically interest only monthly payments during what is called the draw period, but fully amortizing payments during the repayment period. The max that can be borrowed is based on CLTV (combined LTV) when other loans are in place; since you have paid off properties then it will just be LTV. For rentals, don't expect to get more than 80% CLTV; likely you will be offered lower amounts.
Now, finding lenders for this cash-out refi might be a challenge; you might have to make a bunch of phone calls and inquiries to find your lender.
Couldn't you just get a mortgage on these properties? If you want the money long term wouldn't that be better than a line of credit? It wouldn't technically be a cash-out refi since you have no current financing, hence you wouldn't be RE-financing.
Is this correct? (I hope so, since it's what I am planning on doing soon. Don't bust my happy bubble, OK?)
... It wouldn't technically be a cash-out refi since you have no current financing, hence you wouldn't be RE-financing.
Is this correct? (I hope so, since it's what I am planning on doing soon. Don't bust my happy bubble, OK?)
Sorry to bust your bubble Jean but that is incorrect. There are two kinds of refinances - "rate and term" and "cash out". Rate and term applies when there is an existing mortgage and you are not looking to borrow more than the outstanding loan balance; you are simply looking for a new interest rate or new term for the payback period. Cash out is when you are looking to borrow more than the existing loan balance; when there is no loan balance, it is still a cash out refi.