Cash Out Refinance

[Andrew P.]

Hey BP,

I've searched the forums and am still trying to figure a few things out regarding refinancing. I bought a multi-unit in Chicago, IL that I have lived in & rented out for what will be 2 years in April 2017. I put quite a bit of sweat equity and the neighborhood has seen a huge increase in property value. Because of this, I'd like to do the following:

1) Refinance out of my original, 5% down FHA loan into a conventional loan in order to drop PMI and be able to use FHA again for another multi-unit

2) Get an appraisal and (hopefully) pull out equity out of anything that passes the 80% LTV ratio (so I do not have to pay PMI).. Example, say I have 5% equity (based on original down payment) now...Pull only enough equity that will keep me at 80% LTV

3) Use said equity to purchase another property with FHA

A few questions I have are as follows...If I do a refinance and pull some cash out, can I "lock in" a rate and hold on to the equity I intend to pull and only pull the cash when I have a property lined up or do I have to pull the money right away, meaning I will be paying interest on that right away. So say I pull out 20k, can I tell the bank to hold onto it and only really pull it out when I am ready to buy a new place. Also, if I have 1.5 years, will a mortgage broker be able to use my rental income to help me out. Finally, anyone know a mortgage broker here in the Chicago area willing to do this. 

Thanks all

[Zack Karp]

@Andrew P.

With a refinance you can get out of the FHA loan, and depending on your LTV you can reduce PMI, eliminate PMI, and/or pull cash out. You get the cash out at closing, you cannot take it at a later time. Or you can do a 2 prong approach and do a rate/term refi (no cash out) and do a heloc for the cash out, then you have the flexibility to pull it out later. I have some banks that can do a heloc over 80% too. It would be best for you to talk to an experienced lender/LO that is investor friendly and help you structure this in the best way possible.