Financing Help: Cash Out Refinance vs HELOC

[Warren Rubin]

Mortgage & Property details:

Property type: Single family residence (house hack)

Property value: $800k-$830k (based on recent sales & tax assessed value)

Mortgage Term: 30 yr fixed

Principal Balance: ~$507,000

Interest rate: 3.25%

First mortgage payment: Feb 2020

Principal payment: ~$870

Interest payment: ~$1,377

Escrow payment: ~$289

Total payment: $2534.03

Net operating income: $2,900

Hi All,

I would appreciate some advice/feedback on my current situation. I would like to access some equity in my property for my next investment property. My two options are a cash out refi or HELOC. I have gotten quotes for a cash out refi from 3 lenders this week, with the best being a 30 yr fixed @2.625% with $2,774 in points (not sure what other fees I would need to pay). This new mortgage (principal & interest) would be $2,602/mo.

Challenges that I'm currently facing:

- DTI is too high at around 65% because of 2 new mortgages + auto loan under my name.

- I have a Mortgage Credit Certificate on this property (house hacking). From what I know, I forfeit these benefits if I refinance.

Goal:

- Cash out refi or get a HELOC such that the PITI payments are equal to or less than the NOI of $2,900 and my LTV is @80% to avoid PMI.

I have family members who are willing to cosign with me but I prefer not to go that route just yet, unless absolutely necessary. My 2nd property is an out-of-state investment property that I just closed on in July 2020. Can someone confirm that I need to show 12 consecutive months of rental payments before the debt can be disregarded when calculating my DTI (I was told this by a loan officer)?

I have not yet tried to apply for a HELOC because I know my DTI is too high, but I can't decide whether to bring in a cosigner or wait until I can show 12 consecutive months of rental payments to lower my DTI... I'd really appreciate any advice, opinions, or feedback.

Thank you for reading!