How To Get Cash Out Of Your Investment Property

HOW TO GETCASH

OUT OF YOURINVESTMENT

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With the mortgage industry becoming alittle more lax with its guidelines, cash outon investment properties is becomingmore and more common. Of course theguidelines are stricter than there were inprevious years, but just knowing that thepossibility is there can greatly enhanceyour profits on your investment.



DETERMINE YOUR EQUITYThe more equity you have in your investmenthome, the more likely it is that you will getapproved for a cash out refinance. Generally,lenders will not provide you with a loan that ishigher than 75% of the value. If you havesignificant equity in the home, this will not be aproblem for you. The closer that you are to the75%, the less likely it is that you will get approved.If you are unsure of the amount of equity you havein the home, have an appraisal performed to seewhere you stand.



THE TIME FRAMEOne of the largest determinants regardingwhether or not you can get cash out of yourinvestment property is the time frame that youhave owned the home. If you have not ownedit for more than six months, it is not eligible. Inaddition, if the home is listed for sale, it is noteligible. Even if the home was listed for sale inthe last six months, your loan-to-value ratio islimited to 70%.



QUALIFICATIONSIn addition to the above qualifications, lenderswill be stricter when it comes to determining ifyou are eligible. In the wake of the mortgagecrisis, lenders need to be choosy about whatloans they provide. If the loan is risky, they willbe hesitant to do it.



QUALIFICATIONSCash out refinances have always been risky andwith an investment property, they pose an evengreater risk. our first priority when finances gettough would be your primary residence. Thismeans that your investment property comes last. Ifyour renters were to stop paying or you could notfind someone to rent the home, you could be infinancial trouble and stop paying the mortgage.This is why the qualifications are so much stricter.



MORE QUALIFICATIONSYou can expect to have to provide commondocuments such as:

Current pay-stubsLast two years W-2sAssets that will cover at least six months of paymentsGreat credit scoresLease informationTax documents

Your lender may ask for additional documentation,but this is the most common list of items that arerequested for approval of the loan.



IS THE CASH OUT WORTH IT?Stop and think for a moment if the cash out is worth theincreased payment you will need to pay. What are youusing the money for? Is it to improve the property? Ifyou are investing the money right back into the propertyand it will net you higher rent or better profits, then itcould be worth it. If you are not investing it back into theproperty or you do not think that your profits willincrease as a result, the higher mortgage paymentcould be a burden that becomes too hard to bear andshould be considered very carefully to ensure that it isthe right decision for you.



It is not difficult to find a lender that willoffer cash out on an investment property,but you should take the time to make sureit is right for you. Talk to various lenders tosee what programs are offered and howyou can make the cash out work the bestfor you. In the end, you have to rememberthat you need to be able to cover allmortgages in order to stay afloat.



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INFORMATION PROVIDED BY:

Justin McHood

Mortgage Commentator

Information Originally Published: 9/5/15

Justin McHood is Americas Mortgage Commentator and hasbeen providing Mortgage commentary for over 10 years.


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How To Get Cash Out Of Your Investment Property

Real Estate

Transcript of How To Get Cash Out Of Your Investment Property