Tag Archive for: cash out refinance

Cash Out Refinance

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Have you considered tapping into your home equity? A cash out refinance can give you the money you need by replacing your current mortgage with a larger one. Just to clarify, you receive the difference in cash. 

Reasons to choose a cash out refinance:

First, You need a large sum of money all at once

Second, Fixed monthly payments

Third, Payments are included within the life of the mortgage

Fourth, Receive up to 75% LTV

Downsides of choosing a cash out refinance:

More paperwork 

Closing in 3-4 weeks

Interest on mortgage will increase

Is this the right financial move for you?

First and foremost, think about your goals. Next, take into consideration how much money you need. Finally determine how quickly you plan to repay the loan. While a cash out refinance is a good choice for some, there are other options that might save you money in the long run. 

Contact Us Today! 

Is a cash out refinance right for you? Contact us today to find out more, as well as learn about your different financing options.

Free Tools For You! 

Most importantly, we also have free tools available! Download the Loan Optimizer what financing would be best for your investment property.

Learn more!

Visit our YouTube channel today to learn more about real estate investing and how you can get on the fast track to success! 

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DSCR: You Must Own a Property THIS LONG Before Refinancing

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If you’re diving into real estate investing and using DSCR (Debt Service Coverage Ratio) loans, you’ve likely heard the term “seasoning.” Understanding seasoning is essential, especially if you’re following the BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) and want to know when you can pull your money back out to fund your next project. What is seasoning and how can it affect you? Lets take a closer look!

What is Seasoning?

In simple terms, seasoning is how long you need to own a property before refinancing it. If you bought a property one month ago, it’s been “seasoned” for one month. Each lender has its own requirements, and they vary depending on the type of loan and lender.

For example:

  • Traditional Lenders: Often require at least 12 months of ownership before allowing a cash-out refinance.
  • DSCR Lenders: Typically require a 6-month seasoning period, though some allow as little as 3 months—or even none!

Why Does Seasoning Matter for DSCR Loans?

With DSCR loans, this affects your ability to use the appraised value of the property rather than the purchase price. This can be a big deal for investors aiming to get back their investment and move on to the next project. Here’s how it works:

  • After Rehab Value: When you’ve put work into a property, it often increases in value. These rules impact whether you can refinance based on this new, higher appraised value.
  • Cash-Out Timing: The sooner you can refinance based on the higher value, the faster you can reinvest in more properties.

Example:
Let’s say you bought a property for $275,000, put $25,000 of work into it, and now it’s worth $400,000. To pull your money out at this new value, you’ll need to meet the lender’s seasoning requirement.

DSCR Loan Seasoning Requirements: What to Expect

While each lender has its own rules, here’s a typical breakdown of the requirements:

  1. 6-Month: Most DSCR lenders require you to own the property for at least six months.
    • Example: If you bought the property on January 1st, you could refinance it as early as July 1st.
  2. 3-Month: Some lenders allow a shorter 3-month seasoning period.
    • Example: If you closed on January 1st, you could potentially refinance by April 1st, depending on the lender.
  3. No Seasoning: A few lenders have no seasoning period at all. These lenders allow you to refinance based on the current appraised value as soon as the rehab is complete.

Tips for Choosing a Lender Based on Seasoning

Every lender has a “box” of rules, and not all lenders are the same. Some are flexible with shorter seasoning periods, while others stick to strict timelines. Here’s how to find the right lender for your goals:

  • Know Your Timeline: If you’re in a rush to get your cash back, look for a lender with shorter seasoning requirements.
  • Shop Around: Different lenders offer various seasoning terms, so it pays to shop around. Brokers can be a big help here, as they have access to multiple lenders.
  • Use Tools Like the Loan Cost Optimizer: A tool like The Cash Flow Company’s Loan Cost Optimizer can help you compare costs and find the best fit for your loan needs.

Why Shorter Seasoning Matters in the BRRR World

If you’re using the BRRR strategy, shorter seasoning periods allow you to:

  1. Get Your Cash Out Faster: Quickly pull your investment back to fund the next deal.
  2. Maximize Profitability: Refine properties quickly, avoid delays, and keep projects moving.
  3. Stay Flexible: Adapt your lending strategy to different project timelines and goals.

Example in Action:
You buy a property in January, renovate it in February, and get it rented by March. If your lender only requires three months of seasoning, you could refinance by April, freeing up your funds for your next purchase.

The Key Takeaway: Find a Lender that Matches Your Needs

When picking a lender, make sure their seasoning period aligns with your goals. Don’t be stuck waiting months to refinance when you’re ready to move on. Whether it’s a 6-month, 3-month, or no-seasoning requirement, the right lender can help you get your cash out faster, keep your BRRRR projects rolling, and ultimately reach your investing goals sooner.

For more guidance, check out The Cash Flow Company’s tools or reach out to talk through your options. With the right lender on your side, you can make the most of your DSCR loan—and your investments!

Watch our most recent video to find out more!

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How Debt Impacts Your Real Estate Investments

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How Debt Impacts Your Real Estate Investments

Debt plays a significant role in real estate investing, and understanding its impact can help you make informed decisions. Let’s explore how debt impacts you real estate investments and why it’s important to manage it wisely.

Why Use Debt in Real Estate?

Debt can be a powerful tool for real estate investors when used correctly. It allows you to leverage your resources and achieve more than you could with cash alone. For example:

1. Using Debt Effectively:

  • When used correctly, debt helps you purchase properties that may have been out of reach. For instance, instead of paying cash for a single property, you can use debt to finance multiple properties, potentially increasing your returns.

2. Choosing the Right Type of Debt:

  • Not all debt is created equal. Whether it’s a cash-out refinance, home equity loan, or a 0% credit card, selecting the right type of debt for your specific situation is crucial. The right choice can save you significant amounts of money over time.

The Importance of Smart Debt Choices

Making smart debt choices can save you hundreds of thousands of dollars over your lifetime. On the flip side, making poor decisions can lead to financial struggles. Here’s how to approach debt:

1. Avoiding Costly Mistakes:

  • One common mistake is choosing a cash-out refinance when a home equity loan might be better. For example, a typical cash-out refinance could end up costing you a quarter of a million dollars more over the life of the loan compared to other options.

2. Getting the Right Advice:

  • It’s essential to get the correct information before taking on debt. Missteps can be costly, so understanding your options is key. Smart with Debt, a new venture focused on helping consumers, aims to provide you with the knowledge needed to make informed decisions without trying to sell you loans.

Balancing Debt and Investment Goals

Your goal should be to use debt to enhance your investments without letting it become a burden. Here are some strategies:

1. Focus on the Best Debt:

  • Always aim to get the best debt for your situation. This could mean choosing between a cash-out refinance and a home equity loan or finding the best lender for your needs.

2. Protect Your Future:

  • Managing debt wisely isn’t just about saving money now; it’s also about protecting your future. By choosing the right type of debt and understanding its long-term impact, you can ensure your investments remain profitable.

Conclusion: Use Debt, Don’t Let It Use You

Debt can be a powerful tool for growing your real estate investments, but it must be used wisely. The key is to understand your options, avoid common pitfalls, and always aim to put more money into your life by making the best debt choices. Remember, the goal is to use debt effectively, not let it use you. Would you like to find out more about how debt impacts your real estate investments? Contact us today!

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Get Smart with Your Debt

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The Cash Flow Company is introducing a new website, Smart with Debt! Our goal is to help you choose the best type of debt, save money, and more importantly protect your financial future. So, let’s dive into some key topics and get smart with your debt!

Why Smart with Debt?

Nowadays, many people get into debt without understanding the best options available. As a result, this can cost them thousands over time. At Smart with Debt, we believe in using debt wisely. Our goal is to help you:

  • First, Choose the best type of debt
  • Next, Save money
  • Finally, Protect your financial future

Use Debt, Don’t Let Debt Use You

Cash-Out Refinance vs. Home Equity Loan

Sometimes, you need extra money for big expenses or investments. Two common ways to get this money are:

  1. Cash-Out Refinance: This replaces your current mortgage with a new, larger one. You get the difference in cash.
  2. Home Equity Loan: This is a second loan against your home’s value.

However, a typical cash-out refinance could cost someone a quarter of a million dollars over the life of the loan.Therefore, you need to always compare the options first.

Getting 0% Credit Cards

0% credit cards can also be a great way to manage debt. These cards offer a period where you pay no interest. Here’s how to use them smartly:

  1. Transfer Balances: Move high-interest debt to a 0% card.
  2. Pay It Off: Aim to pay off the balance before the 0% period ends.
  3. Avoid New Debt: Don’t add new charges while paying off the balance.

Protect Your Future

Choosing the right debt can not only save you money, but it can also protect your future. Here are some tips:

  • Research: Always compare different loan options.
  • Plan: Have a clear plan to pay off your debt.
  • Ask Questions: Don’t be afraid to seek advice.

Our goal is to get you on the right path but not do the loans for you. It can muddy the water when giving advice and trying to get you a loan also.

Join Us!

We’re here to help you get the best debt for your needs. Check out our videos, leave comments, and ask questions. Together, we can help you get on the right path to financial success.

 

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Smart with Debt: Stop Giving the Bank Your Money!

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Debt can be a useful tool, but only if you use it smartly. At Smart with Debt, we believe in helping you find the best debt options, so you keep more money in your pocket. Let’s explore how to stop giving the bank your money and make debt work for you!

Why Smart with Debt?

Many people take on debt without understanding the full cost. This often leads to paying more than necessary over time. Our mission is to educate you on how to choose the best debt options, whether it’s a home loan, HELOC, or credit card.

Use Debt, Don’t Let It Use You

It’s easy to fall into the trap of taking the first loan that you are offered. However, there are better ways to handle debt. Here’s how:

Cash-Out Refinance vs. Home Equity Loan

Imagine you need money for home improvements. You could choose a cash-out refinance, but this might cost you a quarter of a million dollars over the life of the loan. Instead, a home equity loan might be cheaper in the long run.

Example:

  • Cash-Out Refinance: Higher upfront costs and longer terms can add up.
  • Home Equity Loan: Often lower interest rates and better for short-term needs.

0% Credit Cards

Zero percent credit cards can be a smart way to manage short-term debt. Instead of paying high interest on balances, you can move your debt to a 0% card and save on interest.

Example:

  • Typical Credit Card: High-interest rates add up quickly.
  • 0% Credit Card: No interest for an introductory period, giving you time to pay off the balance.

Best Debt Paths in Your Market

Debt options vary depending on changes in the market. Therefore, knowing the best local lenders can in fact save you thousands. Our main focus is helping you find these lenders in order to make the best choices.

Protect Your Future

By choosing the right debt, you can protect your financial future. To put it another way, better rates and terms mean more money in your pocket now as well as down the road.

Example:

  • Better Loan Terms: Lower interest rates reduce your monthly payments.
  • Future Savings: Less money paid in interest over time means more savings.

Get Educated, Make Smart Choices

Our goal at Smart with Debt is to provide you with the information you need to make smart debt choices. We’re here to help you understand your options and choose what’s best for your situation.

Join Us!

Interested in learning more? Visit our new channel, subscribe, and start your journey to smarter debt today. Leave comments, ask questions, and let us help you keep more of your money and learn how to stop giving the bank your money!

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HELOC vs Cash Out Refinance

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HELOC vs Cash Out Refinance

Are you thinking about tapping into your home equity? If so, you might be wondering whether or not a HELOC or a Cash Out Refinance is the better choice. Both options have their perks, however one may suit your needs better than the other in 2024. Let’s break down the differences to see which option is best for you! 

What is a HELOC?

First and foremost, what is a HELOC? A HELOC is a Home Equity Line of Credit, or an equity line on your property. It operates like a credit card and you can draw from it as needed by using your home as collateral. To clarify, you only pay interest on the amount you borrow, not on the entire line of credit. Here are some key points about HELOCs:

What is a Cash-Out Refinance?

A Cash-Out Refinance on the other hand replaces your existing mortgage with a new, larger one. Therefore, you receive the difference in cash. This option can be helpful if you need a large sum of money and would prefer a single monthly payment. Here are some key points about a cash-Out Refinances:

Which One is Better for You?

Choosing between a HELOC and a Cash-Out Refinance depends on your financial goals and current market conditions. Here are some scenarios to help you decide:

Choose a HELOC if:

  • Low upfront costs.
  • Flexibility in borrowing.
  • You plan to pay off the borrowed amount quickly.
  • Receive 80% to 85% LTV.
  • Interest on mortgage is 3% to 4% and will not be affected by HELOC. 
  • Less paperwork and closing in 1 to 3 weeks.

Choose a Cash-Out Refinance if:

  • You need a large sum of money all at once.
  • Fixed monthly payments.
  • Payments are included within the life of the mortgage.
  • Receive up to 75% LTV.
  • Interest on mortgage will increase to 7%.
  • More paperwork and closing in 3-4 weeks. 

Conclusion

In 2024, a HELOC often provides more flexibility and lower upfront costs than a Cash-Out Refinance. However, your choice should depend on your specific needs and financial situation. Think about your goals, how much money you need, and how quickly you plan to repay the loan. What works best now might not be the best choice in the future. Therefore, always keep an eye on the market and consult with a financial advisor to make an informed decision.By making the right choice, you can save money, reduce stress, and improve your overall financial well-being.

Need More Information?

If you have questions or want more personalized advice, check out our website or give us a call. We’re here to help you make the best financial decision for your future.

Watch our most recent video to find out more about: HELOC vs Cash Out Refinance

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HELOC Vs Cash Out Refi: Which One is Better in 2024?

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HELOC Vs Cash Out Refi: Which One is Better in 2024?

Are you thinking about tapping into your home equity to put more money into your life? If so, you might be wondering whether or not a Home Equity Line of Credit (HELOC) or a Cash-Out Refinance is the best choice for you. Both options have their perks, however one may suit your needs better than the other in 2024. Today we will discuss HELOC Vs Cash Out Refi. Let’s get started by breaking  down the differences and comparing them in order to see which option will put more money into your pocket.

What is a HELOC?

First and foremost, what is a HELOC? A HELOC is a Home Equity Line of Credit, or an equity line on your property. Therefore, it operates like a credit card and you can draw from it as needed by using your home as collateral. To clarify, you only pay interest on the amount you borrow, not on the entire line of credit. Here are some key points about HELOCs:

  • First, Low to no upfront costs: Many HELOCs have little to no initial fees if it is kept for a few years. Even if they do charge, it is normally only in the $400-$500 range.
  • Next, Flexible borrowing: You can borrow as much or as little as you need, as long as you stay within your credit limit.
  • Finally, Variable or fixed rates: Choose a rate that fits your financial plan. There are a variety of options available that can fit your needs.

What is a Cash-Out Refinance?

A Cash-Out Refinance on the other hand replaces your existing mortgage with a new, larger one. Therefore, you receive the difference in cash. This option can be helpful if you need a large sum of money and would prefer a single monthly payment. Here are some key points about a cash-Out Refinances:

  • First, Higher upfront costs: Expect to pay between $3,000 and $8,000 in closing costs.
  • Next, Fixed interest rate: Your new mortgage has a fixed rate, giving you predictable payments.
  • Finally, Longer loan term: You start a new mortgage term, which can be up to 30 years.

5 Benefits of HELOCs

Here are five reasons why a HELOC might be a better choice than a Cash-Out Refinance in 2024:

  1. Lower Costs: It often costs little to nothing to refinance into a HELOC.
  2. More Funds Available: HELOCs usually allow you to borrow a higher percentage of your home’s value compared to Cash-Out Refinances.
  3. Keep Your Low Mortgage Rate: You don’t have to refinance your existing low-rate mortgage into a higher-rate loan.
  4. Fast and Simple: HELOCs are fast and simple to set up, often with less paperwork.
  5. No Regrets: With a HELOC, you’re not committing to a new long-term, higher-rate mortgage, potentially saving you money in the long run.

Which One is Better for You?

When choosing between a HELOC and a Cash-Out Refinance it depends on your financial goals, as well as the current market conditions. Here are some scenarios to help you decide:

Choose a HELOC if:

  • Low upfront costs.
  • Flexibility in borrowing.
  • You plan to pay off the borrowed amount quickly.
  • Receive 80% to 85% LTV.
  • Interest on mortgage is 3% to 4% and will not be affected by HELOC. 
  • Less paperwork and closing in 1 to 3 weeks.

Choose a Cash-Out Refinance if:

  • You need a large sum of money all at once.
  • Fixed monthly payments.
  • Payments are included within the life of the mortgage.
  • Receive up to 75% LTV.
  • Interest on mortgage will increase to 7%.
  • More paperwork and closing in 3-4 weeks. 

Real-Life Example

Today we are going to use the numbers right from David Ramsey’s website. On his website he states that the average debt in America for real estate, car, and credit card totals $290,000. It is important however to understand that these amounts can be even higher for some people. Therefore these numbers can multiply to an even higher number of savings for you depending on your situation. 

Total Debt $290K
Current Mortgage 4%
Total Debt Payments Per Month $2,700 
Savings Goal Per Month $700 

 

Refinance: Mortgage, Car, Credit Card Into One Payment
Interest Rate 7%
Mortgage After Refinance $295K
Savings Goal Per Month $700
Cost Over the Life of the Loan $250K
Cost After Just One Year $113,000

 

HELOC: Take Your Debt and Move it into a Home Equity Line of Credit
Fixed Interest Rate 9%
Consolidate the Car and Credit Cards $57,000
Savings Goal Per Month $700
Cost Over the Life of the Loan $6,000 to $7,000

In sum, a HELOC is usually better for those who want low initial costs and flexible borrowing options. On the other hand, a Cash-Out Refinance might suit you if you need a large sum of money at once and prefer the stability of fixed payments.

Conclusion

In conclusion, a HELOC often provides more flexibility, as well as lower upfront costs than a Cash-Out Refinance will. However, your choice depends on your specific needs and financial situation. Therefore, think about your goals, how much money you need, and how quickly you plan to repay the loan. Most importantly, remember that interest rates and market conditions can change. What works best now might not be the best choice in the future. Always keep an eye on the market and consult with a financial advisor to make an informed decision.By making the right choice, you can save money, reduce stress, and improve your overall financial well-being.

Need More Information?

If you have questions or want more personalized advice, check out our website or give us a call. We’re here to help you make the best financial decision for your future.

Watch our most recent video to find out more about: HELOC Vs Cash Out Refi: Which One is Better in 2024?

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How To Refinance and Boost Your Cash Flow

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How To Refinance and Boost Your Cash Flow

Today, let’s explore how to refinance and boost your cash flow.

It’s probably pretty safe to say that in the real estate world, cash flow is KING!  Because cash flow makes life flow.

But what does cash flow mean to you? Because it comes in all shapes and sizes.

What cash flow means to one investor might be very different from another.

Let’s look at an example.

We have 3 real estate investors: John, Jane, and Jack.

John likes to focus on putting less money down so he can keep more money in his pocket.

Jane likes to focus on making consistent monthly income.

And Jack likes to focus on using cash-out refinancing to gain the most leverage.

Today, let’s take a closer look at Jack’s strategy.

It’s a simple one, but popular, especially during a refinance boom.

Essentially, Jack likes to refinance all of his value-add properties every 3-5 years so he can unlock his equity and bring more money into his life. He can use this money for personal or business matters, but it’s usually for something personal.

Now let’s break this simple strategy down a bit more.

So, Jack owns 3 properties.

He bought each one for $100K.

After 3 years, each property gains $25K in equity. So, Jack refinances and takes the $25K out of each property. All because he wants to use the money for…whatever! Maybe he wants to pay off his credit cards, buy another value-add property, or go on an epic skiing trip to the Alps. The sky’s the limit.

Well, mostly.

Once Jack has this money, he relaxes for another 3-5 years. Then, if interest rates drop, or he gains more equity, or both, he’ll refinance again. And, again, he’ll use the money for whatever he needs or wants in life.

The process repeats over and over until Jack decides to sell his properties or find a different cash flow strategy.

Now, Jack’s method of refinancing isn’t for everyone. But it’s definitely a popular cash flow strategy that many investors enjoy using.

Is it the right strategy for you? Our team is here and ready to help you discover the best path for you.

Happy investing!

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