Best way to pull equity out for first investment property

[Bryan Plumb]

Our situation:

End goal is to have a single family home in Maui in a few years...

We have roughly 257k equity (conservative estimate) in our single family home after about 7 months of ownership (thanks to locking in our purchase price a year before we closed).

My current primary residence mortgage is a 10/1 ARM at 2.75%

The house payment is easily covered by only one of our incomes (I'm married) and I've recently got a pay increase that is more than our current monthly mortgage.

My desire is to buy an investment condo in Maui, and rent it out at about break even.... to either move into when we move to Maui or to sell our current primary residence and the condo for a single family home in Maui.

I need roughly 140-150k for condo downpayment and have about 30k currently.

Would the best move be to do a cash out refinance to get the rest of the needed funds?

[Chris Bruni]

Having just returned from a Hawaii vacation, this post caught my attention.

Depending on your comfort level with the ARM you currently have and prospective interest rates down the road, you may not want to refinance your current loan, although that is certainly an option.

For quicker cash without the major expense of a refi, I have found it very easy to get a HELOC (home equity line of credit) on my primary residence and use those funds to build investments. Many institutions will have very low cost options (just a few hundredt dollars) to get started and they can happen more quickly. You may also find that the first year interest rate charge to be very low (2% or less) and its simple interest so you can pay down the debt much faster than an amortized loan.

Keep in mind that there are financial risks no matter which way you go.