Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Buying & Selling Real Estate
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 5 years ago on . Most recent reply

User Stats

105
Posts
21
Votes
Daniel Sabato
21
Votes |
105
Posts

How to Refinance a Property to Pull Equity Out

Daniel Sabato
Posted

I always hear people talk about refinancing a property, not for a lower rate, but to cash out their equity? Can someone explain how this works or give me an example? I don't understand how it works. I do understand refinancing with a lower rate.

Most Popular Reply

User Stats

6,024
Posts
5,071
Votes
John Warren
  • Real Estate Broker
  • 3412 S. Harlem Avenue Riverside, IL 60546
5,071
Votes |
6,024
Posts
John Warren
  • Real Estate Broker
  • 3412 S. Harlem Avenue Riverside, IL 60546
Replied

@Daniel Sabato when you do a cash out refinance you get a higher appraised value then when you purchased the property. Lets say you purchased for 150k and have a mortgage balance of 100k, but now your value comes in at 200k. Most banks will lend on 75% or so of the appraised value. In this case, your new mortgage would be 150k (75% of the appraised value). This means that you pay of the first mortgage of 100k, and you walk away with 50k of tax free money. 

Technically, your 50k is not income or gains because it is loaned to you by the bank. For your purposes, this cash is free and clear and can be used for further investing or even for personal use. I have always used this strategy as it allows me to buy more properties. 

  • John Warren
  • Loading replies...