Pulling Equity Out Of 4-units
I just purchased a 4-unit building with 10% down. I put down about $75K. Is it possible to pull this money out through re-financing to use for another property? I know that when I bought my residence that I was getting a letter a day about re-financing. Currently, the 4-unit is cash flowing positive, so the extra debt would not hurt. Thanks for any advice. Joe
If you just purchased the building then you probably pay the usually PITI (Principal, Interest, Taxes, Insurance) and PMI(Private Mortgage Insurance). My wife and I recently remortgaged our 4 unit and we got a bank to give us a mortgage at no cost (shop around!!). The options we had were to remortgage at a fixed rate for 20 years, interest only!! or an equity loan that had a lower interest rate to start but was variable.
The "interest only" mortgage gives you a little more money at the end of the month BUT remember NOTHING is going toward your principle unless you add to the minimun required payment. It may or may not include taxes and insurance. This depends on the bank.
An equity line of credit (and Mortgage) on an investment property may go 80% to 90% of the appraised Value. It depends on the bank's appraiser and property location and your numbers. This can also be use as a revolving cash source.
Some banks do not like to see you take money out of your property.
I don't think the mortgage rates will go up any real amount for a while, so at this point I would lean toward an equity loan. It's a lower rate at this time, 2? points lower than a mortgage. But remember... it's variable, it can and will go up.
If there is any way you can do it, get rid of the PMI. It's throwing money down a rat hole. By Federal Law the cutoff is 20% of appraised value on owner occupied. On investment properties it's a can of worms. Find a bank that doesn't require it. If a bank tries to stick you with it just tell them "No Thanks, there is enough equity to not require it", give it a second or two to sink in and start to gather your papers and walk out. Hopefully they will reconsider. If not, go elsewhere. Over time it can add up to a lot of wasted money. They make you jump through all kinds of hoops to get rid of it once it's a part of your mortgage payment.
Hope this answers your question
Jim
Jim,
thanks for the ideas. I am not paying PMI as I obtained an 80%, 10% loan on the property. Your idea about a line of credit secured by the property sounds like a good one. Is there a chance they will require me to cross-collateralize with my primary residence?
Thanks, Joe
Once you've had it 1 year, if your area has appreciated significantly, then you're in good shape. Otherwise, there's probably not a great way to do it besides shopping around for a second.
I DO have a lender who will do an immediate (like next-day !) no-seasoning cash-out refi on an NOO, based on APPRAISED value, to an 80LTV with a 620 or better...
I don't know of any lenders who'll do cash-out refi on an NOO to 100% until, as Hibby said, you've been on title for 12 months (NOO).
Mark
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