cash-out-refi to cover loan or Sell stocks

[Daniel Suarez]

Hey All, 

I purchased a home about a year ago for around $200k, I put close to $90k in fixes and did a historical appraisal that came up to $410k. I borrowed $70k from family and was planning to return it after the refinance, but the bank refinance came back at $330k which is much lower than what I expected. So my options are these. 

Cash-out-refi the property. That would give me about $54k to pay, the loan and I would sell stocks to cover the difference. The problem is that my original loan is at 3.99% and the new one would be at 6.25% (they only allow me to get 60%) So my monthly mortgage would go from $1207 to $1715, that's almost a $500 loss in cashflow. 

My other option would be to not refinance and instead sell stocks. I would sell about half of united healthcare that in reality didn't do bad, so I wouldn't be losing there and losing stocks the other half for tax purposes. 

I know this can be a very "I can't decide for you situation" but I would love to hear what would you do in my position. A couple of notes about myself. I'm a high-income W2 and I expect this house to value for a lot higher in the next couple of years. Thanks in advance. 

[Elle S.]

I wouldn't cash out refi. Is there another way to pay back your family member? Will they go for letting you pay it back at a certain interest rate like an installment loan or do they want their entire $70k back?

Instead of selling the stocks, have you considered a Loan Management Account (LMA)? You can take out a low interest loan against your brokerage account. These loans have pretty favorable terms since the stocks in your account are the collateral if you default so reach out to your brokerage. Alternatively, you can take out also take a loan against your 401K as well via your 401k servicer. Both of these options allow you to keep your securities invested in the market, charge a much lower interest rate than HELOCs/personal loans/today's rates, and are only taken out of your investment accounts if you default on the loan. Sounds like the better middle ground.