Should I refinance/cash-out?

[Joseph Roman]

Back in 2013 I bought a 1 bedroom condo downtown for $150k on a 5/1 ARM with 2.875%. I was single and living in it, and the idea was to pay it off very quickly then rent it out. I paid the loan down to $85k so far.

However, I got married, kids, plans changed.  So now I am living in a home and have been renting the condo out.

So I have a lot of money tied up in this property and would like to have that money to purchase a second rental.  However, I am having a problem doing the math in my head and figuring out the best option to get a second rental.

The 5/1 ARM will be up next year so I am sure my rate will increase.  I owe $85k and the condo is worth $175k+.  Am I right in thinking I should just cash-out refinance it and use the money to buy another rental or is this a bad idea?

[Shaun Weekes]

Originally posted by @Joseph Roman:

Back in 2013 I bought a 1 bedroom condo downtown for $150k on a 5/1 ARM with 2.875%. I was single and living in it, and the idea was to pay it off very quickly then rent it out. I paid the loan down to $85k so far.

However, I got married, kids, plans changed.  So now I am living in a home and have been renting the condo out.

So I have a lot of money tied up in this property and would like to have that money to purchase a second rental.  However, I am having a problem doing the math in my head and figuring out the best option to get a second rental.

The 5/1 ARM will be up next year so I am sure my rate will increase.  I owe $85k and the condo is worth $175k+.  Am I right in thinking I should just cash-out refinance it and use the money to buy another rental or is this a bad idea?

 Doing a cash out refinance is your best options for a couple reasons. You'll be able to put yourself in a fixed rate and get a good chunk of cash to use for a DP on another home.

You should be able to refinance up to 75% of the value of the home. Contact your HOA to make sure that no more than 49% of the units are rentals as this will make the refinance more difficult as it would become a non-warrantable condo.

I hope this helps and have a great day.