Refinancing Rental Property

[Jae Kim]

Hi BP fam!

I'm pretty new to real estate and I'm hoping someone can help me understand the refinancing part of BRRRR. Let's say that I buy a $700,000 house with 20% down. I rehab the property for $80,000 and rent it out.

A year later, I have $530,000 left on my mortgage and I want to refinance the house by getting a new mortgage from a new bank. Appraisal for the house comes back at $850,000. So.....

Bank lends me 75% of the appraised amount ($850,000*75% = $637,500)

$530,000 of the $637,000 has to go towards repaying my previous loan so I am now left with $107,500

Is that correct or am I way off? Thanks!