Why Cash Out Refinance On Investment Property

You may wonder how smart investors built their wealth so quickly. They simply use their property’s equity to fund the purchase of another property, more like tapping into their gold mine. Savvy investors know having an investment property provides property owners the potential to either build wealth or boost cash flow. In short, when you cash out refinance on investment property, the capacity to pursue a variety of financial options is in your hands.

What does cash out refinance on investment property mean?

When you cash out refinance on investment property, you are simply taking out another mortgage to replace your existing mortgage – usually on a larger amount. Cash out refinance allows you to liquidate equity into cash for a lot of purposes – among them, building real estate investments and property portfolio, etc.

To give an example: you have a mortgage on a house worth $150,000 and the remaining mortgage balance is $90,000. If you need easy cash, you can refinance your current loan into a new $140,000. You pay up the $90,000 balance and instantly get $50,000 cash. With a cash-out refinance, you will be left with a bag of money to spend.

What is cash-out refinance on investment property usually used for?

 Why Cash Out Refinance On Investment Property

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More cash flow

A cash-out allows you to make use of the equity of your property to simply boost your cash flow or use on other expenses such as education or buying a new car or take the vacation you’ve been dreaming of. If you’ve built significant equity on your investment property, more cash flow awaits you. Cash-out loan terms that are longer, and at lower rates, will further free more cash for you.

Make improvements to investment property

Cash-out refinance will allow you to make improvements to your investment property; upgrade rental units, refurbish or renovate. Making improvements to your rental property adds substantial value to your investment and allows you to raise the rent.

Expand investments

Using a cash-out refinance on investment property will allow you to further invest either in real estate stocks, bonds, or retirement savings.

Consolidate debts

Cash out refinance allows you to consolidate multiple expenses and debt into a single monthly payment, saving you thousands of cash each year and greatly reducing your efforts. However, consolidating debts such as credit cards into a cash-out refinance secures them with your property, thus, becoming a lien on your property.

Deciding to cash out refinance on investment property may be a smart way to increase long term wealth. However, it is necessary to study and determine whether this option will prove to be feasible to your circumstances.

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