Looking for some creative financing to pull money out of rental

[Rich Lopes]

Hi 

Looking for advice on the following scenario:

1. Currently own a rental property worth about 1.3M. Owe about 600K on this property on a 30 yr fixed @ 3.75% with 27 years to go. Rental history of 4 years with current Rent of $3900 / month.

2. Looking to do cash out refi and take out about 300 - 400K for a down payment to buy SFH for a primary residence. Currently living in a rental.

3. What are some of my best options in terms of financing? 

Hope to you hear from some creative financing gurus. TIA.

[Chris Mason]

Hi @Michael Vallee and @Rich Lopes,

Re: Michael's 2nd mortgage @ 7% idea, as applied to Rich's scenario.

What's that? What's my watch say? My watch says that it's MAAAAAAAAATH TIME!

($600k * 3.75% + $300k * 7%) / $900k = 4.83%. 

That's the weighted interest rate of all your debt on that property if you take out a $300k 2nd at 7%. If you think back to when we were kids and learned how to find the mean average of something, that formula will look familiar to you. :) 5 grapes plus 7 grapes divided by 4 children equals an average of 3 grapes per child. In this case, the financing would be at an average cost of 4.83% per dollar. 

And you're probably going to pay 3 points or so upfront for that hypothetical hard money 2nd mortgage on an investment property to 70% CLTV, assuming you could get it.

I don't have any credit reports in front of me, but I'm pretty sure you can do a little better than 4.83% at a cost of three points. Call it a hunch, it's not like I do mortgages or anything.