Cash out Refi or Wait?

Question

After jumping through some hoops I'm setup to make my first investment! On july 28th I stumbled upon the world of Real Estate and BiggerPockets. Since then I've been obsessed in finding a way to make it happen given my situation, I believe it isn't a typical situation..

I currently live in affordable housing tied to my employer and the city. To continue living here, I'm required to work full time and unable to purchase a 2nd property or join any LLC's. After requesting the city make an exception and being denied that exception, I've moved on to purchasing with my wife on title (yes she knows), and be co-guarantor since my income is the vast majority of our income.

Got word today I pre qualified for 125k at 3.5% after 20% down! Nothing under 100k..

Next issue is I have little to no cash....maximum 10k with liquidating personal stock investments and selling a timeshare I should've never bought years ago. Anyone want it? Lol..

Spoke to my mortgage advisor who says I can pull out 25k at 3.15% or 35k as cash out refinance at 3.25% 30yr.

Since I don't have cash now for down payment, am i crazy to think I can use cash out as "cash", then finance what's left? 🤔 total fees for both loans=$5595

As long as I hit the 50% rule it still makes sense right?!?

I realize cash would be much better and I may just need to wait but curious what your thoughts are if I didn't wait.

Thanks

Allen Maris · Answer

I think we're missing some info, as Chad asked. What property would be a cash-out refi? Also, those fees you're getting quoted are pretty high for such a small loan. And also, where are you looking to buy at such a cheap price point? Not anywhere in our area!

Be careful your broker isn't selling you on something you can't do. Remember, don't pay any upfront fees out of pocket to a lender. It should ALWAYS be paid out of escrow at the close of escrow when they provide funding. There are a lot of shady people offering mortgages that they never intend to fund.

Chad Duncan · Answer

Talk with the city on what they would do if you had your wife on title and you being a guarantor. Which is likely the same thing they denied you for. Are you in the financial position to get kicked out of your current housing situation? Cash out refinance of what, do you own property? If you don't have the money, stop trying to do a deal. It only wastes your time and everyone else involved. Impatience is a really good thief of wealth.

Blake H. · Answer

@Allen Maris appreciate you looking out. Yeah definitely not anything near us anywhere near that price point, which is why I'm looking in JAX, Florida. Lender did say that the fees were just title and escrow, but yeah I thought they were high too. It's that something to do with California again? Lol.  My Lender licensed in Floridas fees were less than half.

The cash out would be from my primary residence, then I would use that towards a down payment on another property.

Something I forgot to mention that's making me more comfortable with the risk is the fact that another agreement for my primary residence is that the value of the home does not go up and down with the market. It only appreciates or decreases in value a percentage of the change in my neighborhood median income from the time I bought, 2012, to the time I sold... yeah my situation is crazy!!! But yeah, because my house shouldn't all the sudden lose value, if the market changes, I feel like it's less risky than a normal cash out refinance

Blake H. · Answer

@Chad Duncan part of the purchase agreement between the city and the employer is also that the employee must stay on title. Which is why I'm removing her and buying in her name with my income. We're not in any position to get kicked out. What I was trying to explain is that I can cash out REFI my primary residence, then use that amount as a down payment on an investment property. For example if I BRRRR and my refinance of the investment property after Rehab covers the cost of the cash out from my primary residence and rehab, why wouldn't I do that? Easier said than done but I think it can be done. Maybe I'm too much an optimist

Blake H. · Answer

@Blake Henderson and no buying in Florida

Blake H. · Answer

@Bruce Woodruff and such good advice! I've planted seeds with the wife, but for now she's opposed to moving away from family and i don't think I'll win that war. I even suggested we move with family into a multi family. Got her thinking but not ok with it just yet.

Bruce Woodruff · Answer

Are you buying in Santa Barbara? Remember all the advice you got about moving...? :-)

Cash out Refi or Wait?

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