Cash out refinance options

[Paris Capers]

Hello,

We have a townhouse in San Diego. We refinanced in 2019 and currently owe 428,000 with an interest rate of 2.75.

We want to leverage this property for cash so we can get cash for a new deal and would like to know any options for this. The market is appreciating well in the area right now as well.

Can we get a cash out refinance from a property that we already have refinanced once?

We wouldn't mind selling it either, but we have tenants living in it for another 9 months. Are there any options to get around this?

Any recommendations for real estate agents in San diego or lenders would be greatly appreciated.

[Chris Lynn]

It depends on the appraised value of the current property.  Generally, you need to have 30% equity for an investment property mortgage, so to do a cash out you would need to have more than 30% equity now.  I'm going through that process with one of my properties and the numbers made sense because I was going to refinance for a better rate anyway and I had a TON of equity in the property.  When you refinance, there are fees just like when you get a new mortgage.  I figured that since I was paying the fee already, I'd pull the cash out at a very low interest rate and have it available for another purchase, negating the need to pay more mortgage fees on the next deal.  The downside is that the interest rate was a little higher for a cash out mortgage vs a traditional refinance.

I would suggest you determine a reasonable market value for your property and then multiply that by 70%.  Subtract from that number your current balance and 1.5% for fees.  If 70% of the property value less your current mortgage (plus fees if you roll them in) is enough money for you to justify the fees, the potential increase in your interest rate, and you plan to hold the property for at least a few years, then do it.  Sorry if I was too simplistic or answered more than you were asking.

Example (does not consider interest rate change):

Property Value - $700,000 (made up number)
Current Mortgage - $428,000
70% of Value - $490,000
Estimated Fees - $490,000 x 1.5% = $7,350
Available to Cash Out - $490,000 - $428,000 - $7,350 = $54,650
Assuming these are real numbers, would you be willing to pay $7k to get $55k?