How can I buy a second property with equity from my first?

[Bradley Russell]

I have ~$70K dollars in equity on house 'A'. I would like to purchase a second property (call it 'property B') and then move into it. The median home value in Utah -where I live- is $345K.

If I rent upstairs and downstairs in property A, and then downstairs in property B (while living upstairs), I could potentially have zero fixed expenses. How can I make this happen sooner rather than later?

___________

Here is the solution I came up with. 

Cash out refinance 

-I guess you can only use 80% of the equity on property A in the cash out refinance, so 56K instead of 70K.

-I can only use one FHA loan.

An FHA Mortgage payment on property A is ~$1,700 with a ~4.5% interest rate. A cash out refinance with a ~3.5% interest rate could put a thirty year fixed at ~$1,700 per month, and the 70K would then serve as a down payment for property B. What am I missing here?

Can I cash out refinance property A and then live in property B, or does the cash out refinance force me to live in property A as my primary residence for a fixed time?

If yes, I feel like there is some legal and ethic loop hole here....

Anyone have any ideas or insight for me?

[Sudhanshu Singha]

@Bradley Russell Do you have an estimate of what Property A will appraise for and what is your current mortgage balance is? The reason I am asking is because when you do a 80% cash out refinance it is not 80% of the of the equity you have but 80% of the appraised value.  For example if you had a 250k mortgage balance on a home which will appraise for 320k then you would have 70k in equity but if you did a 80% cash out refinance it would not be 80% of 70k. The Calculation to get your cash out amount would be 320k(Appraised Value) x 80%(Cash Out Percentage)=256K(Cash Out Amount)-250K(mortgage balance)= 6k (Net Cash Out amount) rather than 56K which would be 80% of 70K(equity).

Depending on your appraisal value and mortgage balance you might not find it worthwhile to do a 80% cash out refinance. Hope this explanation helps!