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A real estate question
Posted on 10/7/24 at 4:57 pm
Posted on 10/7/24 at 4:57 pm
I want to upgrade my house. I have equity in the current home so I'm considering a cash out refi I don't understand cash out refi and would like a little advice on the subject.
When I do the refi, would it be advisable to move to an ARM rather than conventional and then try to rent the property?
When I do the refi, would it be advisable to move to an ARM rather than conventional and then try to rent the property?
4
Posted on 10/7/24 at 6:25 pm to 75503Tiger
What’s your first loan terms? If good, don’t do cash out refi
Heloc or fixed second
Heloc or fixed second
Posted on 10/7/24 at 7:53 pm to 75503Tiger
quote:
When I do the refi, would it be advisable to move to an ARM rather than conventional and then try to rent the property?
If you refi and then rent the property you are in violation of the terms of the mortgage if it’s an owner occupied refi. I’m sure people do it but it could potentially put you in a bad spot with your lender.
Posted on 10/7/24 at 8:49 pm to 75503Tiger
You need to talk to a loan officer. There will be specifics that will be needed to give you the right answer for you.
Posted on 10/7/24 at 9:12 pm to Penn
I'm in a conventional 30 with about 5.5%. I want to do an outright sale but the home proces arent where I think they could be in a few years. I'm thinking about doing the ARM loan to see if I can get my expected appreciation out of the current house and, maybe, get the payment down to the point that my rental rate would render a small profit.
My other thought is to put the house in an LLC of rental properties but that makes no sense since I have no plan or desire to build a real estate portfolio
My other thought is to put the house in an LLC of rental properties but that makes no sense since I have no plan or desire to build a real estate portfolio
Posted on 10/8/24 at 6:16 am to 75503Tiger
Why do you want to upgrade and then rent it out? Most rental homes are lower end cosmetically.
It sounds like the biggest issue is that you may have negative equity here?
It sounds like the biggest issue is that you may have negative equity here?
Posted on 10/8/24 at 6:22 am to 75503Tiger
quote:
I'm in a conventional 30 with about 5.5%
Don’t do a cash out refi. Rates are around 5.5–6.25% for standard mortgage and a cash out refi has higher rates.
HELOC or fixed second is what you want.
See if your bank offers a p&i HELOC vs. interest only.
*how much are you looking to get out of the equity?
This post was edited on 10/8/24 at 6:28 am
Posted on 10/8/24 at 7:20 am to pwejr88
quote:
Don’t do a cash out refi. Rates are around 5.5–6.25% for standard mortgage and a cash out refi has higher rates.
HELOC or fixed second is what you want.
I never understand this advice. Its as if there isnt a rate attached to a HELOC or fixed second
Most are 8-10% or higher. So depending on the cash amount his blended rate will be higher than current market
Do your cash out refi and just do a 30yr fix vs arm there isnt a big break between them in pricing
Posted on 10/8/24 at 7:29 am to 75503Tiger
quote:
I'm in a conventional 30 with about 5.5%. I want to do an outright sale but the home proces arent where I think they could be in a few years. I'm thinking about doing the ARM loan to see if I can get my expected appreciation out of the current house and, maybe, get the payment down to the point that my rental rate would render a small profit.
None of this makes any sense. Don’t rent a property that’s not a good rental especially a good rental ROI, end of story. Forcing a home into a rental because it’s negative equity is asking for trouble to make it an even worse financial decision.
You won’t be able to find a payment with a 5.5% mortgage for 30 years that’s any lower, and refinancing is going to cost you at least $4,000.
Posted on 10/8/24 at 6:57 pm to SDVTiger
quote:
I never understand this advice. It’s as if there isnt a rate attached to a HELOC or fixed second Most are 8-10% or higher. So depending on the cash amount his blended rate will be higher than current market Do your cash out refi and just do a 30yr fix vs arm there isnt a big break between them in pricing
HELOC’s are usually at Prime and say a 1st mortgage is 7%, a 2nd is usually 0.75-1.25% higher. Plus with both of these scenarios you’re not financing the renovations for 30 years with a higher 1st mortgage payment. The debt will be paid off sooner and your equity restored.
This post was edited on 10/8/24 at 6:58 pm
Posted on 10/8/24 at 7:24 pm to SDVTiger
quote:
I never understand this advice. Its as if there isnt a rate attached to a HELOC or fixed second Most are 8-10% or higher. So depending on the cash amount his blended rate will be higher than current market Do your cash out refi and just do a 30yr fix vs arm there isnt a big break between them in pricing
In many cases you can find a bank with a 12 month intro rate on HELOC and they cover closing costs. In a setup like that you would come out ahead va doing a cashout, especially if you are only holding on to it for a few years.
Posted on 10/8/24 at 9:14 pm to pwejr88
quote:
HELOC’s are usually at Prime and say a 1st mortgage is 7%, a 2nd is usually 0.75-1.25% higher. Plus with both of these scenarios you’re not financing the renovations for 30 years with a higher 1st mortgage payment. The debt will be paid off sooner and your equity restored.
Very few get a 7% its more like 9 or 10
So depending on his loan amount the rate will be higher
Even fewer stay in a 30yr fix past 7yrs its like 10%
So no one is fiancing anything for 30yrs
And the doomsday posters of the Money board who want prime to be raised to 13% yet advise on a Heloc with a cap of 22% is also hilarious
Posted on 10/9/24 at 7:25 am to pwejr88
quote:
HELOC’s are usually at Prime and say a 1st mortgage is 7%, a 2nd is usually 0.75-1.25% higher.
Yeah but then he has 2 loan payments not one. His intention was to try and lower his payments, adding a second loan with a higher interest rate isn’t going to lower his total payment due.
I don’t think a HELOC is a bad idea, I really don’t know what all the OP needs money for and what his home value and ROI is either.
Sometimes you can get Heloc’s for a good deal and other times they are terrible.
Posted on 10/10/24 at 5:05 pm to baldona
quote:
His intention was to try and lower his payments
rarely are you going to take out more debt on your house with a lower payment. The difference in interest rate would have to be large.
This post was edited on 10/10/24 at 5:06 pm
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