Taking a cash out refi advice for a rookie

[Steve Bell]

My partner and I recently bought and rehabbed and furnished our 1st STR. Had my real estate agent come by to take a look at the finished project and got her unofficial opinion about the value of our new vacation rental.

She said that it could easily sell for $90 - $110k more than what we purchased it for. Given that analysis we think it would be worth it to try to get an appraisal and do a cash out refi, so we can pay back the HELOC we used for the downpayment, rehab, and furnishing costs.

I have a couple questions for the BP community.

1. Would anyone hesitate or have any reason NOT to get the loan refinanced other than getting an enormous interest rate hike on the new loan? Keep in mind we bought in Jan 2023 and our interest rate is a 6.625%. I have not looked at latest rates, but I know this is not anywhere close to the 2-3% rates we enjoyed just a short couple of years ago.

Another piece of info I neglected to mention, we received a second home loan on this property from our lender so we only put down 10% of the purchase price. 

2. Because we only put 10% down should we expect after a cash out refi that the lender will refi this into a conventional loan and expect 20% be left in? Would there be anyway we could ask for the refinanced loan to be a second home loan and we could get 90% LTV with the new terms?

3. If we did a cash out refi, will the lender be looking for the new % to be left in figured from the “Original” purchase price or would it be calculated from the newly “appraised” price?

Thanks in advance for any and all advice!!