A cash-out refinancing loan can help you get an influx of capital when you find yourself land rich but money poor. There are three main benefits associated with a cash-out refinancing loan:

1. It’s still a first-position mortgage, unlike a mezzanine loan or a second mortgage, so the terms are typically better. A cash-out loan replaces any existing loan you currently have on a property by paying it off, so it is possible to get these loans from both traditional bank lenders and hard money or private lenders. However, it is also possible to get a cash-out mortgage for a property that you have already paid off, but these cash-out loans are more readily available from private lenders than banks.
2. It allows you to hold on to a property that you don’t want to sell yet while still expanding your real estate portfolio. If you have an income-producing property that you’ve rehabilitated, or are still in the process of turning around, then you might not yet want to sell it to pay off the original loan (whether it’s a private loan or conventional mortgage), but you don’t want to miss out on new investment properties, so you can take money out of that property and put it towards a new one.
3. It enables you to pay for improvements to a property that you already own. Maybe you have an investment property that has been in your portfolio for some time and now it needs renovations to attract new tenants or allow you to increase the rents; a cash-out loan can give you the necessary funds to cover those improvements costs and might be easier to qualify for than a construction loan on a property that you already own.

So what should you do before deciding to apply for a cash-out refinance loan? First, you need to determine how much equity you currently have in your property. This is done by subtracting how much you owe on your current mortgage (if you don’t own the property outright) from the current market value of the property. And, second, find a lender. Depending on the type of property and its condition (if it’s in need of improvements), you might have to decide whether to go with a traditional lender or a private lender. Keep in mind that private lenders are more likely to lend on properties that are in need of rehabilitation or that you own outright.

If you have questions about our cash-out loan programs, contact Montegra at 303-377-4181.