Cash-Out Refinancing, Then Refinancing Again

[James Free]

I'm curious as to whether any experienced landlords have had success with the technique of refinancing the same property twice, with the first being a cash-out refinance and the second being a rate-lowering refinance.

Having done both types of refinances before, I'm well aware that if you want cash out, lenders penalize you with substantially higher interest rate and point requirements. However, if you wait some period of time (often six months), you could refinance the property again (perhaps with a different lender, or perhaps with the same lender) and since no new cash is being taken out, you'd just get standard rate refinance terms.

The downside to this is obviously that refinancing is expensive, and doing it twice is doubly-expensive. However, the cost could be somewhat mitigated by opting for fewer points and a higher rate in the first refinance (to the extent that the lender offers the option), knowing that you'll only be paying that rate for a few months.

Has anyone actually done this? Have the numbers made sense? Any gotchas?

[Sean Kuhn]

I did exactly this in 2019 and 2020 on two loans, but it was by accident because rates dropped so much after the cashout I was able to refinance that again one full percent less. I wouldn’t say don’t do it, but run the numbers and see how the math comes out. I never rely on a more than 5 years for a break even on a loan, loans come and go so fast sometimes. If it took 6 years to break even I wouldn’t bother.