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3 replies to this topic

#1 Brandon1008

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Posted 16 February 2017 - 11:47 AM

Im new to this.  I bought a home 2 years ago from a friend.  I believe the house is worth 10k more now.


I want to get a cheaper payment, and/or some cash out if possible?


My rate is 3.75% and I pay mortgage insurance for the life of this loan... unless I refi.


Can someone help explain to me how this works and if this is a smart idea?  This house is about to become a rental.



#2 Brandon1008

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Posted 17 February 2017 - 09:47 AM

alrighty... it was worth a shot.

#3 hyschmied

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Posted 17 February 2017 - 10:19 AM

Not sure if you'll get a better rate but you may get rid of the PMI. If you didn't have that much equity in the beginning pulling more cash out might be tough.

Call up a loan officer and check.

#4 oldblue

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Posted 17 February 2017 - 12:04 PM

We need more to go off current value and balance on the loan.  Depending on the loan you originally got, guessing FHA say you originally bought a 100k house with 3.5% down you'll have lowered the principal very little in 2 years after the upfront mortgage insurance payment being added to the balance.  Lets say you have a 95k balance owed currently, most lenders want 20% down to get rid of pmi on a fixed rate.  20% of a $110,000 value would be 22k in equity needed which means you would need another 7k down to go conventional.  A lot of lenders will do 15% down ARMs with no pmi. Which would mean you only need an additional $1500 down to get rid of pmi in the above example but your rate would be variable.  Cash out is most likely impossible.  I might be wrong but I believe most lenders want to see 30% equity to do a cash out refi.  So in the 110k house example you would have to owe less than 77k to get any cash out. 


Another thing to consider is if you are making the house a rental you are not supposed to have an owner occupant loan.  Technically if the lender finds out they can call the loan due.  Investment property loans generally need bigger down payments and have higher interest rates.  On your first few you might get away with 20% down after that commercial loans require 25% -  30% down.

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