3rd mortgage too risky?

[Timothy Morales]

Hello everyone! I am looking to get started in real estate investing and need some sound advice. I bought my house in 2018 right before the market boom for 369k and did a cash out refinance in 2020 when the rates dropped. My house at the time appraised for 500k and I was able to take out 50k while also lowering my rate 2 points. The 2 subsequent mortgage payments combined now equaled my initial mortgage payment at the higher rate, so I essentially was paying the same but now had 50k in my pocket. I added impact windows and a pool with the money and also have a brand new metal roof thanks to an insurance claim.

Zillow now has my house appraised from 585k-646k which means I still have a substantial amount of equity I can tap into. My first mortgage is for 285k and second mortgage is at 40k which means I can take out 84k-127k (depending on appraisal) with a 70 LTV ratio. Is it too risky to do this on my primary residence and use this money for a BRRRR to pay off the 3rd mortgage? I live in Miami and don't foresee my house value crashing to the point where I'll be underwater and get margin called but crazier things have happened. Any advice will be much appreciated. Thanks!

0 VotesFollowShare0 Replies

[Erik Estrada]

Quote from @Erik Estrada:

Quote from @Timothy Morales:

Hello everyone! I am looking to get started in real estate investing and need some sound advice. I bought my house in 2018 right before the market boom for 369k and did a cash out refinance in 2020 when the rates dropped. My house at the time appraised for 500k and I was able to take out 50k while also lowering my rate 2 points. The 2 subsequent mortgage payments combined now equaled my initial mortgage payment at the higher rate, so I essentially was paying the same but now had 50k in my pocket. I added impact windows and a pool with the money and also have a brand new metal roof thanks to an insurance claim.

Zillow now has my house appraised from 585k-646k which means I still have a substantial amount of equity I can tap into. My first mortgage is for 285k and second mortgage is at 40k which means I can take out 84k-127k (depending on appraisal) with a 70 LTV ratio. Is it too risky to do this on my primary residence and use this money for a BRRRR to pay off the 3rd mortgage? I live in Miami and don't foresee my house value crashing to the point where I'll be underwater and get margin called but crazier things have happened. Any advice will be much appreciated. Thanks!

0 VotesFollowShare0 Replies

 What you could do is  a Cash out refinance again, pay off both mortgages and net some cash out. How long ago did you do your refinance and get a second mortgage? 

Most lender's won't do a third mortgage unless it is some sort of hard money loan. But even then it may be tough to do. 

 Especially if this is your primary residence