Refinance and cash out

[Account Closed]

Hey guys, 

Sometimes its the simplest concepts that lead to my overthinking and confusing myself. However, how does refinancing and taking cash out work?

Lets assume I purchase a property with a $400,000 loan (LTV of 80% for $500,000 property) then force appreciation so it was now worth $600,000. If I were to refinance, then how would it work? Would I receive a loan of $480,000 (80% LTV of $600,000), pay off the first mortgage and keep the difference? All while the the tenants are paying of the new mortgage?

Does the property repeat its underwriting process? 

Thank you for your explanations in advance

[Chad McClain]

There are a few things to consider when looking to cash out refi:

- There is normally a cooling off period of 6-12months before you can refi

- You need a new appraisal (make sure to get this ordered from the institution that you will be refinancing with. Example: If you order one, they can not use it and you will end up having to pay for it twice)

- Look at different scenarios with different levels of refinance to make sure rent covers the additional payment amounts

- Take into consideration the cost of the refinance and difference in interest rate if any. These can actually offset the benefits when calculating your CCR from your original loan.