Cash-out refi to buy a new home

[Giman Kim]

Hi, 

As interest rate is dropping with impending federal reserve's announcement next week, I feel like this is a good time to tap into equity in my investment property in Cambridge, MA 02141 and maybe purchase another property with cash.  Any local lenders to recommend? 

[Brandon Croucier]

Plenty of good lenders around here on BP.

Happy to connect and see what we can do! 

[Devin Peterson]

Quote from @Giman Kim:

Hi, 

As interest rate is dropping with impending federal reserve's announcement next week, I feel like this is a good time to tap into equity in my investment property in Cambridge, MA 02141 and maybe purchase another property with cash.  Any local lenders to recommend? 

Hi Giman! I am lock to you in Peabody! Our office is just outside downtown. Lots of great in state options and national wholesale lenders as well. More than happy to connect and strategize with you!

[Andrew Zamboroski]

Quote from @Giman Kim:

Hi, 

As interest rate is dropping with impending federal reserve's announcement next week, I feel like this is a good time to tap into equity in my investment property in Cambridge, MA 02141 and maybe purchase another property with cash.  Any local lenders to recommend? 

Not local to the area, but happy to see if we can help!

[Derek Brickley]

Hey Giman!  A cash-out refi will generally have worse terms than a purchase.  If purchasing another property cash is important for you then it is always a possibility, but again a purchase could be another option.  Hard to say which would make more sense without knowing exactly what you're looking for but feel free to reach out if we might be able to help.

[River Sava]

Hi Giman - It's a great time to explore your options with the recent rate changes. I'm from Newburyport if you know the area.

 If you're interested, I can point you in the direction of a few potential lending options that might be a good fit for your situation. Let me know if you'd like more info!

[Giman Kim]

Quote from @Derek Brickley:

Hey Giman!  A cash-out refi will generally have worse terms than a purchase.  If purchasing another property cash is important for you then it is always a possibility, but again a purchase could be another option.  Hard to say which would make more sense without knowing exactly what you're looking for but feel free to reach out if we might be able to help.

Derek, so assuming I get a 300K from equity via cash-out refi and I purchase a new property in full cash with no mortgage but with enough monthly cash flow to cover the new loan amount of $494 K ($194K + $300K), wouldn't it be okay to take this consolidated approach with one loan with two cash-flowing properties covering the monthly mortgage and other expenses? I did think about HELOC option for downpayment but If I do a separate purchase, that's another mortgage. Plus, it takes several years to break even on the closing cost and first few years of payments are mainly applied toward the interest and less to the principal. If I acquire the second property with full cash, that's at least an instant equity which I may be able to tap into for 3rd, 4th,..assuming properties rise in value over time. Any other thoughts or suggestions?

[Erik Estrada]

Quote from @Giman Kim:

Quote from @Derek Brickley:

Hey Giman!  A cash-out refi will generally have worse terms than a purchase.  If purchasing another property cash is important for you then it is always a possibility, but again a purchase could be another option.  Hard to say which would make more sense without knowing exactly what you're looking for but feel free to reach out if we might be able to help.

Derek, so assuming I get a 300K from equity via cash-out refi and I purchase a new property in full cash with no mortgage but with enough monthly cash flow to cover the new loan amount of $494 K ($194K + $300K), wouldn't it be okay to take this consolidated approach with one loan with two cash-flowing properties covering the monthly mortgage and other expenses? I did think about HELOC option for downpayment but If I do a separate purchase, that's another mortgage. Plus, it takes several years to break even on the closing cost and first few years of payments are mainly applied toward the interest and less to the principal. If I acquire the second property with full cash, that's at least an instant equity which I may be able to tap into for 3rd, 4th,..assuming properties rise in value over time. Any other thoughts or suggestions?

 Hi Giman, 

I think your approach is solid if your current property's equity allows for a for a full cash purchase. You will also have the ability to refinance the new purchase easily with a delayed purchase refinance (You can price these as a rate and term refinance), if you plan on only refinancing the purchase price + cost of improvements. 

Using a HELOC, could also work if you plan on paying it off quickly through a delayed purchase refinance on the new property. HELOC will save you on closing costs (depending on the bank)

[Derek Brickley]

Quote from @Giman Kim:

Quote from @Derek Brickley:

Hey Giman!  A cash-out refi will generally have worse terms than a purchase.  If purchasing another property cash is important for you then it is always a possibility, but again a purchase could be another option.  Hard to say which would make more sense without knowing exactly what you're looking for but feel free to reach out if we might be able to help.

Derek, so assuming I get a 300K from equity via cash-out refi and I purchase a new property in full cash with no mortgage but with enough monthly cash flow to cover the new loan amount of $494 K ($194K + $300K), wouldn't it be okay to take this consolidated approach with one loan with two cash-flowing properties covering the monthly mortgage and other expenses? I did think about HELOC option for downpayment but If I do a separate purchase, that's another mortgage. Plus, it takes several years to break even on the closing cost and first few years of payments are mainly applied toward the interest and less to the principal. If I acquire the second property with full cash, that's at least an instant equity which I may be able to tap into for 3rd, 4th,..assuming properties rise in value over time. Any other thoughts or suggestions?

It is definitely scalable, and we have seen a number do that!  As Erik said below, you could use a form of delayed financing on the cash purchase to pull the majority of your equity out and have for another property.  If your goal is to continue to acquire properties, then that leverage is going to be important and start with the properties you have (as you mentioned with the cash-out).  If your goal is to focus on minimal cost for this, that is when it might make more sense to do it as a purchase with a new mortgage.  Either way - you're moving around equity just being held in different properties.  Whether that is on one property or mulitple really wouldn't make much of a difference.  

Note that with a purchase or refinance, there are always going to be closing costs (typically higher on a cash-out refinance) and this restarts your amortization schedule.  So either way you do it you will be subject to those costs and for the first years majority of your payment will be applied towards principal.  What terms do you have on your property now?  Is the rate higher?  Or do you have any prepayment penalties?  

[Matthew Crivelli]

Quote from @Giman Kim:

Hi, 

As interest rate is dropping with impending federal reserve's announcement next week, I feel like this is a good time to tap into equity in my investment property in Cambridge, MA 02141 and maybe purchase another property with cash.  Any local lenders to recommend? 

Hi Giman - we are local to MA and have great DSCR rates. I would be happy to price out your refi. Thanks! 

[River Sava]

Quote from @River Sava:

Hi Giman - It's a great time to explore your options with the recent rate changes. I'm from Newburyport if you know the area.

 If you're interested, I can point you in the direction of a few potential lending options that might be a good fit for your situation. Let me know if you'd like more info!

 I also sent you a dm!

[Conor Deasy]

Hi @Giman Kim, we are local lenders (Connecticut), for cash out refi's into DSCR's our rates dropped significantly. Happy to give a quote if you're still shopping around

[Donna Rundo]

Right about that! 

I'd be glad to send you options. Let's connect!

[Dave Skow]

@Giman Kim- thanks ... the fed lowered their rate .5% today ...mortgage rates will likely take a few weeks to drop  and likely won't  drop as much as this rate ...timing is decent to get a cash out refinance  started ..you might hold off on the rate lock though ..if the property is a 1 unit - you will likely be able to go to a 75% loan to value for the new loan amount 

[Giman Kim]

Yeah we're thinking about sitting and observing for a little bit and instead, work on saving more money for downpayment & cash reserves and paying down our principal for our property in Cambridge, Mass. We just saw few target properties go from active to contingent/pending status on MLS, it's hard to land on good cash-flow/turn-key property with low inventory nowadays. Thank you all for the input!

[M. Greger]

Hi! With rates dropping, it sounds like a great time to tap into your equity for a new investment. I'd love to help you with this. Let's connect!

[Lien Vuong]

Cambridge Savings likely has some good options if you're already in the zip code. Try local banks and Credit Unions, they'll offer the best terms for you. 

[Dave Skow]

Quote from @Giman Kim:

Yeah we're thinking about sitting and observing for a little bit and instead, work on saving more money for downpayment & cash reserves and paying down our principal for our property in Cambridge, Mass. We just saw few target properties go from active to contingent/pending status on MLS, it's hard to land on good cash-flow/turn-key property with low inventory nowadays. Thank you all for the input!

thanks - the above average properties will be seen and snapped up ...if interested in buying another property - get  pre approved so you can be prepared  to make an offer if a good property becomes avaiable - good luck

[Carolyn Fuller]

Quote from @Dave Skow:

Quote from @Giman Kim:

Yeah we're thinking about sitting and observing for a little bit and instead, work on saving more money for downpayment & cash reserves and paying down our principal for our property in Cambridge, Mass. We just saw few target properties go from active to contingent/pending status on MLS, it's hard to land on good cash-flow/turn-key property with low inventory nowadays. Thank you all for the input!

thanks - the above average properties will be seen and snapped up ...if interested in buying another property - get  pre approved so you can be prepared  to make an offer if a good property becomes avaiable - good luck

 That's exactly what we did with our lender, Cambridge Trust, which recently was bought out and is now Eastern Bank. 

The pre-approval allowed us to make an offer before the condo we purchased was even advertised as being on the market. Fortunately for us, our offer was accepted immediately.

This was at a time when we were competing against buyers who were scarfing up Cambridge property with cash offers well above asking price.

[Connor Hibbs]

Hi Giman,

We have seen some significant drops in rates over the last week and a half. Rates for SFR's can now go as low a 5% flat and 2-4's are still down to 6%. I'd be happy to send over some rough pricing for you to see what your sceanrio would look like.

[Jacqueline Wright]

It sounds like you're in a good position to take advantage of the equity in your investment property and the potential for lower interest rates. For a cash-out refi in Cambridge, MA, you may want to look into local lenders, credit unions, or regional banks, as they often have better knowledge of the local market and can offer competitive terms. Consider reaching out to lenders that specialize in investment properties and can move quickly to capitalize on the current market conditions. Be sure to compare terms, fees, and interest rates to maximize your cash-out strategy and help fund your next property purchase.