Newbie Trying to Free Equity

[Jeremy Mackay]

Hi guys

I apologize in advance for such a simple post, but I can't seem figure out how to get this train moving. Any advice would be much appreciated. Here's where I'm at-

My wife and I are looking to buy a second home in a touristy area close to where we live. The big idea is buy a family vacation home and build value primarily through long term equity but also with (probably limited) cashflow. 

We want to pull equity from our primary residence to help us fund this purchase. At 80% LTV, monies freed would go towards - down payment > rehabs > pooled for next property purchase. My question is, what is the best way to free up equity? I've read the No or Low Money Down book, listened to the BP podcasts, searched this site, and am more confused than ever!

For some reason, I've had 'cash out refinance' stuck in my mind so I've reached out to 3 lenders to get estimates. Doing that seems really expensive though, plus I lose my really low rate and my monthly payments go up. Here are the numbers I'm currently working with: 

Primary Residence

$350k Estimated Home Value

$225k Loan Value

30 year fixed @ 3.25% (2.5 years old). 

$1450 monthly including PMI and taxes/insurance.

Was I right with my inkling that cash out refi is the way to go or did I gloss over some detail somewhere? These numbers that I'm getting just don't excite me as much as I thought they would. Again, any and all help is much appreciated. 

Happy Holidays! 

Jeremy 

[Aaron K.]

@Jeremy Mackay your interest rate is low. Very low, a refinance would force you to give that up and because it is your primary residence and you presumably plan on living there for a long time it probably isn't the greatest idea to blow that up. I'm guessing the numbers you are being quoted are about 5% which would cost you about $4,000 more in interest per year. You might look into a HELOC this would keep your current payment and interest the same but the HELOC would likely be for a shorter term.