Higher Cashout Refinance with 30 years terms or 15 Years term ?

[Prakash Singh]

My home worths $425K, I owe $200K. I am currently at 15 year 2.75% mortgage (11 Years left).

Option 1:

I can get a cashout refi at around 2.75% for 30 years with $125K cashout. I could use this $125K to buy 1 or 2 investment properties (with mortgage).

Option 2:

I can get a Cashout refinance at 2.25% rate for 15 years terms. But I won't be able to cashout as much (i can go upto $75K in cashout) because monthly payment will increase beyond I can afford my monthly mortgage for my primary home.

Which option is better if my ultimate goal is to just invest for few years and not to take any cash out from my investments.

I have a rental which gives me positive cashflow which I am keeping aside to use towards downpayment for new investments.

Sometimes I tell myself not to be greedy and go with option 1, pay higher interest rate for 30 years but get more cashout and build rental portfolio. Sometimes my mind says go with lower interest rate for my primary home and save some money on the interest I am paying.

Let's see what you geniouses has to say. Thanks in Advance.

[Will Fraser]

Hi @Prakash Singh, welcome back to the BP forums! 

In my opinion the difference between the two loan options is that you'd be paying 0.5% interest to borrow an additional $50k.   AND they would LET you extend your debt out 3 freaking decades (sidenote: how does that make any sense at all?  sub 3% interest rates for 30 years?)

For me, I'd take the additional $50k for 0.5% interest AND I'd love to have my home on a 30-year fixed rate loan instead of a 15-year, so Option 1 :)