Cash out refi for down payment. Covid rules?

[Samuel Persson]

We are looking to use  a cash out refinance on our current home. We have a second home we are interested in and would move to. We would rent our current home. I spoke with a loan broker and the cash out refi is not a problem, but there are current loan rules in place due to covid buying that blocks us from using the cash as a down payment. They suggested having a family member gift (what are the tax implications ) or hold the money for 2 months to have it cool off and use it then. Do any of you have input for how we should proceed?

[Iris Chiou]

Hi Samuel, 

From my understanding, you cannot cash out refinance your primary residence and use those funds immediately to buy another primary residence. That would be a violation of your mortgage terms. If you are planning on refinancing your current primary residence, you can use those funds immediately for a second home as a vacation home or investment property. Another option would be to refinance your current primary residence into an investment property and then use those funds to buy another primary residence. Definitely recommended speaking with your lender further to discuss different options. Hope this was helpful!