Board Topic: HELOC rental home that we would like to pull some cash out
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HELOC

Posted by: reggiej Apr 29 2004, 11:01 PM
We have a rental home that we would like to pull some cash out of for the down payment on another rental property.
We learned from our mortgage holder that we could refinance with him and reduce the number of years remaining from 19 to 15 but not pull any cash out. This is intriguing because in 15 years we will be in the middle of college expenses for the kids.

My question is does it make sense to do this refinancing with current mortgage holder then try to get a home equity line of credit or home loan with another lender? If I do this refi with current lender will I have enough equity to do a HELOC or home loan. What are the potential draw backs?
The house appraised value is approx 84k and the mortgage is 52K

Posted by: loanuniverse Apr 30 2004, 02:18 PM
Reggie:


A couple of things come to mind. Is the current lender under the impression that you are still living in the house? You mention that the house is a rental now.

My question is does it make sense to do this refinancing with current mortgage holder then try to get a home equity line of credit or home loan with another lender? The refinancing depends mostly on the savings in interest and the amount of fees that the current lender is going to charge you.

Essentially, you will need to make the choice with all of the numbers in front of you. I see at least three choices in front of you. First, refinance with your current lender. Second, refinance with your current lender and get a home equity loan from either the same lender or another one, and finally get another first mortgage with another lender.

The main problem that I see is that additional financing will only provide a very small amount of additional money. Lets say that you get a lender to come in at a junior position and give you a home equity loan up to 80% of the house value {assuming that the property qualifies not being owner occupied}. You will only get an additional $15,000.

I think that you would be better served by sticking with a lender that does not charge closing fees. A first mortgage loan involves fees that would affect your overall cost of funds significantly.

If I were in your position and was in doubt about what to do, I would just look at the refinancing and compare it with the amount that you are paying right now. If refinancing alone makes sense, I would at least do that.

Good luck and hope this helps.
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