Does a cash out refinance make sense for me?

[Jacob Tate]

My wife and I are looking to move to a bigger house but are dependent on the sale of our current home to have enough for the down payment. We are wondering if getting the down payment from a cash out refi and then renting our current house would make sense.

Here are the details:
- Need about $35k for a down payment
- Current home worth $275k, we owe $220k on the mortgage, bought it for $240k
- Estimates for monthly rent for our home are $1800-$2000
- Current mortgage payment + HOA + utilities = $1950

Happy to give more details if needed!

[Chris Mackinlay]

@Jacob Tate

Probably not. If you rent it for $2000/month after a refinance, it would be like buying the house for investment purposes at $275k.

Violates the 1% rule of thumb by a lot.

Sure you could cover the mortgage and taxes, but you'd be losing money with every repair and vacancy.

Probably a better option to sell it. Also, there are costs in refinancing.