What is the MAX cash-out refi amount I qualify for with a rental property?
I own a rental property (was initially a primary residence when purchased) but I have since rented it out and moved in with my wife. My credit score is in the low 800's. The loan is conventional 15 year. The appraised value of the home is approximately $115k and my loan balance is $77k. I understand that I have $38k in equity and 70% LTV. I am looking to possibly refinance the mortgage using a cash-out refi in order to pull the equity out and use towards the purchase of a new home (that will be used as a primary residence). Can I do the cash-out refinance at the full appraised value ($115k)? Or can I only do the cash-out refinance at a lower amount? I've heard people talking about doing a 75% LTV cash-out refinance, but I'm confused as to what that means...Please help! Thanks! by grambo_146_139 from Carlisle, Pennsylvania. Jan 27th 2013
Steven Ceceri (123LoanYes)
#12 ranked lender in Rhode Island - 723 contributions
Cash Out Investment would likely be maxed at 75% Loan To Value. You should explore Purchase Options in advance of just assuming the Cash Out will take care of your needs. I am happy to help look at both scenarios for you if you'd like. Just let me know.
What Purchase Options would I have? I basically want to buy a house that I normally couldn't afford, by using the cash from the cash-out refinance as a down payment. I figure using a large sum of cash as a down payment is attractive to a seller, and looks great for the new lender since there will be instant equity at the time of sale. This is all theoretical since I don't plan on moving for another couple of years. But if a house at a great price pops up, I might be tempted to jump on it. Again, what purchase options would I have that would be more beneficial than using lump sum cash as down payment? I feel this is the only way to keep my monthly payments as low as I want while also having a mortgage on the rental property that is still easily covered by the tenant's rent.
Steven Ceceri (123LoanYes)
#12 ranked lender in Rhode Island - 723 contributions
Cash Out for investment property is based on a number of factors including property type, credit score, and meeting all other criteria, including but not limited to debt to income ratios. The property would be appraised and the value would be used to determine your loan to value. If it appraises for $115,000 as you noted, a 75% loan to value would equal a maximum loan amount of $86,250. From this amount, you would need to cover your closing costs and pay off your existing mortgage. There must also be a benefit when all is said and done to do the refinance, such as a payment savings. Your new debt to income ratio would be based on your new loan for the investment property (with offsetting rents), plus any existing debt (car loans, student loans, credit card bills, etc), plus the new property you are looking to purchase. Planning on some ways to just make a purchase with all available loan options would be a conversation that I would recommend having before pursing taking cash out of an investment property. A Trusted Mortgage Professional can help determine any and all options you may have to consider. For instance, if you are eligible for a FHA Insured Loan, you could purchase a property with just 3.5% down payment. If you'd like to speak offline, please let me know. Thank you!
Joe Shamie (Joe Shamie)
#4 ranked lender in New Jersey - 1,412 contributions
You LTV will be limited to 75% on an investment property
Michelle Curtis Loan Originator NMLS 401173 (MichelleCurtisLO)
#77 ranked lender in Florida - 2,245 contributions
Max cash out is 75% If you'd like us to discuss the situation further to make sure you are aware of all your options, give us a call 201-962-3555 we would be glad to help you explore all your options.Ask for Benny or Michelle
Barb Lanis (BarbLanis)
#69 ranked lender in Illinois - 679 contributions
I have several clients that have done cash-out refinances on their primary homes in order to purchase investment properties. The best bet has always been where we could completely pay cash for the new property. However, I don't see this as a good route given your info. If you have a history of being a landlord (initially, it seems like you do), then you could purchase a new rental property and the rental amount could offset your debt-to-income ratios. I am only assuming that this is the overall issue, I would need more info as down payment minimums do apply for investment properties. Please send more info barb.lanis@1amllc.com
Joe Metzler (JoeMetzler)
#17 ranked lender in Minnesota - 4,848 contributions
75% of the appraised value is the maximum cash you could get if you take a new loan out against the house.... Your follow up answer "a house your cant afford"??? Maybe you should sit down with a local loan officer and discuss your plans, and then seriously think about the realities of affordability.
Steve Azarch (sazarch)
#18 ranked lender in Tennessee - 93 contributions
75% is the most loan to value on investment cash out refinance loan.
Michelle Curtis Loan Originator NMLS 401173 (MichelleCurtisLO)
#77 ranked lender in Florida - 2,245 contributions
Max cash out dollar amount is usually 200K FYI
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