How To Strip The Most Equity - My Dilemma

[Account Closed]

Here is the scenario. I have a home that I’ve owned for 6 years. It’s worth about $380k and I owe about $240k. I want to strip out as much equity as possible. Today a wild idea occurred to me and I want to consult the community. But first the traditional options and why I don’t like them.

1. Refinance - This would require 80% LTV and only allow me to strip about $64,000. Also requires closing costs.

2. HELOC - same as above with a higher interest rate and an additional monthly payment on the borrow. Also requires closing costs.

Now for my wild idea...

3. Sell to myself - If I buy the house from myself using an FHA loan @3.5% down I'll pay about $13k plus closing costs. I'll get the tax exemption having lived in it for 2 of the past 5 years along with a new basis of $380k. Most importantly, I'll clear about $140k on the sell side with $13k plus closing going back in for a net of $127k. I realize I'll pay PMI and my monthly cost will go up..but putting an extra $63k in my pocket in the middle of a pandemic seems like the move.

Has anyone ever done this?? Is it even legal??

[Derek Dombeck]

Assuming that you have the property titled in an LLC currently, I don't think this will work since you are the Member of the selling entity. If its titled in your personal name, it would just be a refinance.

I would try to find a friend or family member who has an under performing IRA or has money in a bank CD. Give them a 2nd mortgage in exchange for your equity. You get the cash, they get a safe stable investment, and it never appears on your credit.