Refinancing my house

[Joseph D Chapman]

Hello!

We are getting ready to do a refinance, we bought our house about 6 years ago and we bought the worst house in the nicest neighborhood we could afford. 3 years into living there we did a refi and got a VA loan. (I was not eligible for the VA loan when we first bought the house) now we are getting ready to but our first duplex or bigger (hopefully bigger) and we are doing a refi on our current home to free up my VA so we can buy with no money down. Is this smart?

Also I would like to do a cash out refi because I was hoping to get the money we put into the house when we fixed it up, back out. Is this a good idea?

We paid 213k when we first bought it. We refi it and the new loan was 280k. Now I want to do another refi and was hoping to do so at 380k we are very close to that number.

[Sterling Hiebert]

I am an investing noob, but I would be very leery of that. refinancing to free up the VA loan is a good idea so long as you plan to live in that new residence (VA loans cannot be used on rental properties). however, you also should take into account the fact that cash out refinancing will give you extra money in your pocket, but it will increase your income-to-debt ratio which could seriously harm your ability to get a loan on the new property in the first place. other things I would take into account would be:

1. what are the closing costs going to be on the new loan? are they going to exceed the cost of mortgage insurance if you just purchased the new home using a conventional? since the VA loan doesn't require a down payment anyway, cash out to make a down payment is like taking a loan from your wife to pay off her debt.

2. do you have enough to make the down payment on the conventional without having to pay mortgage insurance? otherwise, that cash-out option would likely be best spent rolled back into the loan to meet that 20% threshold where they cut off the MI. 

3. is the interest rate going to be the less than or equal to your current loan? otherwise you will be accepting a whole lot of extra risk by refinancing vs trying to just get a conventional loan with your current debt. 

4. what can you reasonably rent your existing property for? 

5. what is the likelihood that you can get, and keep a responsible tenant in that neighborhood? 

odds are that if a person can afford to rent in "the nice part of town" they can also afford to own in the nice part of town, and are probably money-savvy enough to know the pros and cons of each. if you are planning on a mortgage approaching 400K, the rent you would have to charge to account for mortgage, insurance, taxes, and property maintenance would likely price too high for the majority of renters out there, and you risk renters subletting to individuals who might not value your property as highly as you would like.