All Topics / Finance / Refinancing-How and Why?

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  • Profile photo of sportz43sportz43
    Participant
    @sportz43
    Join Date: 2010
    Post Count: 7
    April 16, 2011 - 1:45 am
    Beginner question, but I have bought my first IP and getting close to finishing the renovation and getting it refinanced
    Total Purchase price and construction costs totalled about 250,000 but I only about 200,000 borrowed, meaning I put in a significant amount of cash initially. Expected revaluation is a conservative $300,000.
    When the time comes to refinance, how does it work and what is the general purpose for doing so?
    I want to refinance at 80% to avoid LMI and get it closer to Cash flow+ taking into account rental income to cover the IO loan.
    If these figure are reasonably accurate, 80% of 300,000 is 240,000, Am I therefore basically borrowing 240,000 for a 200,000 property, therefore giving me real access to the 40,000 in cash if I wanted or am I essentially only borrowing the $200,000 required and leaving the rest in equity. My motivations are I would like to access a bit of the cash to give be a cash buffer as recommended by many, re-coup a bit of my initial deposit and have some money to put towards other projects
    I understand the purpose for refinancing/revaluing is what investors do to access equity, however do they do so in cash or keep it in equity? Any thoughts on how one would manage this refinancing situation, considering I would like to get myself in a position to by another property in the future
    Profile photo of sFinanceculturesFinanceculture
    Member
    @sfinanceculture
    Join Date: 2011
    Post Count: 6
    April 18, 2011 - 8:30 am

    What are you trying to accomplish with a refinance: lowering your payments, getting out of an adjustable? Are you in a 30 yr program now? How long do you plan to stay in your home? Just some basic questions you should ask yourself before approaching a lending institution with this question…If it still makes sense in looking at a refi after addressing these questions, then have your loan officer contact an appraiser to get a peek at what value your home might bring…..the rate on your first is competitive with current rates, your 2nd is about 2% higher when compared to an equity line, but there's little chance you can refinance it other than combining with your 1st then paying mortgage insurance…
    Just a few things to think about..
    hope u get the point..
    thanks..

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