Hello! Looking for some advice on our refi situation. We want to pay off our debt (car/credit cards/student loans/etc), and we also want to build a horse barn with living quarters on our property. We plan to do a cash out refi to fund our plans, and should be able to get $100k. Here’s my question, which plan makes the most sense:
Plan A: Use $100k cash out to pay off debt, and then use $20-30k as down payment for barn loan. The thinking here is that it would be easier to get a barn loan if our other debt was gone.
Plan B: Use $100k to pay cash to build the barn (assuming it will cost roughly $100k to build), after which we can get home appraised at a higher number and get another cash out refi to pay off debt.
Rental Property Investor · Miami, FL · Member since 2017 · 2k+ posts · 911 votes
4y
Hi Derek,
I would chose Plan A. Assuming the car/credit cards/student loans have a higher interest rate than your refi loan would, I would pay that off immediately. This will instantly save you money by having a lower interest rate each month.
If you chose Plan B, you will be paying a higher rate for the cost of having all loans out for the time while you build the barn. Once the barn is built, if it doesn't appraise at value you expected, you will be in a tough position.