Cash out Refi on primary vs conventional loan on duplex

[Corie Bilotta]

Hi, everyone!

I'm looking at financing options for buying my first investment property.  In going through the financing options, I started a cash out refi on my primary residence.  I can get $45k out of it based on the appraisal we just did.  

I thought I'd be able to get $60k but that's not going to happen.  I planned to use the equity combined with cash to make a cash offer on a duplex.  Now, I won't have enough from the equity and cash ($20k) since it will only be $65k ($45k home equity + $20k cash) and that would be a duplex that needs quite a bit of repair in this area which I'm not really interested in doing.  And that would leave me with no cash left until I save more.  I wanted something that needs updating but not a whole house remodel.

I'm thinking I don't want to use the equity at this time because its not really enough for what I wanted to do.  I worry that if I go ahead with the cash out refi, then for whatever reason a bank doesn't qualify me for a duplex using the equity as down payment, I will end up stuck with a higher interest rate than I currently have on my mortgage, no duplex and a higher mortgage payment on my primary.

I wanted to get others opinions about what to do.  If I left any important info out, please let me know and I will clarify further.

[Upen Patel]

@Corie Bilotta Based on your #, it looks like you are buying a $80K property. If that is the case, then why not just do a loan on the rental with 20% down? You have the cash for the down payment, so that's not an issue. With this approach, you keep the low interest rate you have on your primary home. And the loan is an expense against the rental, which brings down the tax. You can't write off the added mortgage payment or HELOC payment as expense against the rental.

Upen Patel, Mortgage Banker

Federal NMLS# 1374243