Cash-out refinance a good idea?

Question

Hi everyone I'm new here so I don't know I I'm posting my concern/question in the right forum. I've been reading some books on real estate as well as listening to biggerpockets podcasts and I want to get started with real estate investing but as a newbie I feel apprehensive about getting started...Here is my question: Do you think a cash-out refinance is a good idea? My primary home is currently valued at 450K and I owe 248k...The reason I want to do this is because with the cash-out (50k) I can completely pay-off a second home I purchased 5 yrs. ago in Mexico; the interest rate on the mexican property is 10.5%...The mexican property is a nice two bedroom ocean front condo that I currently rent out for $1200; I purchased the property in Mexico to have as a retirement option in the future (15+years). Another option is to continue to rent out the mexican property and thus let the renters pay down the mortgage over time and use the cash-out money instead to purchase another home in the U.S. (Southern California). What do you think? -I'm a little scared about either option since I recently read Dave Ramsey's book and he is totally against using any debt as leverage...! Your opinions and suggestions will be greatly appreciated...

thank you,

Charles

thank you,

Charles

Jonathan Jaime Velarde · Answer

Keep the property and have the tenants pay down your debt!

Use the money to get another property that can cash flow and make sense for you and your current situation.

Ali Boone · Answer

Well, for anything real estate I caution against listening to Dave Ramsey. He's good at his path and the advice that he offers, if you want to be like Dave Ramsey. I've never been interested in being him so have never taken his advice.

The way to decide which route to go is to figure out how/where you'll be able to pay the least in interest. Most likely you can get a lower interest rate on a cash-out refi than 10.5%, so it would be less costly for you to do the refi than continue paying the 10.5%.

Always run the numbers on all scenarios and figure out which will cost you the least. That's how I always do it.