Cash Out Refinance on Your Investment Property

TwinCity Lending can help you WIN at investment property ownership with a cash-out refinance loan

Cash Out

Congratulations on doing a little winning at life, all of you investment property owners out there!  We at TwinCity Lending know it frequently takes a lot of blood, sweat, and tears to make investment property ownership a reality. Regardless of how you came into ownership of this type of home or building, we want to make sure you know how to keep growing your footprint as a landlord or keep your investment property in tip-top shape with our cash out refinance options.

What is a Cash-Out Refinance Loan?

Very simply stated, a cash-out refinance is a way to unlock the cash you have sitting in equity in your investment property. If you have 30-40% of your existing investment loan paid off, or if your property has gone up significantly in value in the last several years, you may want to consider taking out a new loan at a higher principle than your existing mortgage. Then, you can use the difference as cash-on-hand for any number of growth or maintenance objectives.

For example, let’s say your property’s fair market value amount is $175,000.00. For a cash-out refinance loan to make sense as an investor, your principal loan balance needs to be $122,500.00 or lower (loan-to-value). We arrive at this total by the equation:

($175,000.00 Fair Market Value) x (.75 Loan-to-Value) = 122,500.00

Once you complete your cash-out finance loan, you can take the amount of the cash-out loan and pay off the existing mortgage ($122,500.00) and then have $52,500.00 left over to spend!

How do I manage the risk of a cash-out refinance loan?


Remember,  you still will have a “mortgage” on the first property that you will pay down incrementally after your cash-out refinance. Further, the principle will be a bit higher than your original loan because you are trying to “liquify” your property’s equity. It is paramount to have a long look at both your existing financial resources and your growth and investment goals before you make this decision.

For example, if you have a great deal of experience flipping properties and have had successful renovating and selling experiences in the past, a cash-out refinance may feel like a reasonable risk.

Also, if you have reliable renters in place and a solid lease on an existing property that can place you in more confidence as you refinance with cash out. If you believe that renovating your property will cement your renter relationship for a long time to come or make the property more attractive to potential renters, the risk of refinancing may seem like a safer bet.

In any case, it is always wise to cover your “risk” bases before moving forward on any refinance.  If the refinance is to serve as a “band-aid” for a more significant financial issue, it may be a good idea to put the decision on hold until you feel more comfortable with the risk you are assuming in this transaction.

Who can benefit from a cash-out refinance loan?

Investment property owners with a minimum of 30% equity in their property stand to gain the most “flexibility” from this type of loan. Property owners with less than 30% equity may also be able to use a cash-out refinance loan to lock in a lower interest rate, saving hundreds or even thousands of dollars in interest payments over the life of the loan.

Are you one of the following people? If so, a cash-out refinance loan could be a smart way to grow your portfolio:

  • Short-term flippers or fixers: You are looking to buy a house, fix it, and sell it at a profit
  • Long-term buyers and holders: You want to buy a house and keep it, typically with an all-cash offer or big cash down payment.
  • Long-term buyers and holders: You already own a property but need to repair or update it.

How can I use my “liquid” equity?


Technically, you could use the money for whatever you want, like a vacation or a new car.  However, savvy investment property owners will often spend their liquid equity on one or more of the following:

  • A down-payment on another investment property
  • Improvements to an existing property, which may increase the property’s market value or enable the owner to increase lease revenues
  • Costs of “flipping” investment properties for higher potential return on investment

The key with using the money from this type of loan is to grow as an owner in some way, either by improving your current property or by adding more properties to your portfolio for lease or “flipping” potential.

How do I start my cash-out refinance loan process?

At TwinCity Lending, we want to make all your loan applications as simple as possible. We have mortgage calculators on our website, and convenient appointments available to answer all your questions. Schedule one here whenever you like!

Before your appointment, please know that you will need to meet a few requirements before beginning the refinance process. Qualifying credit score, fees, closing costs, and other loan terms are all part of the application process. Checking in regularly on your credit score is good general practice, and can help you avoid and credit score “surprises” when applying for cash-out refinance.

Lender fees up to 3% of the loan amount and closing costs and up to 5% of the loan amount are also part of the overall loan process, so factor that into the amount of cash you want to take home from the transaction.

How will I receive my money from a cash-out refinance?

Typically, it takes between 30-45 days for approval on your cash-out refinance application.  Once approved, the payout can usually occur within three days. The cash transaction is made through wire transfer, first to the original lender to pay off the original mortgage, and then the remainder is wired to your bank account. Instead of a wire transfer, the title company will issue the funds with a certified check.

Thank you for trusting TwinCity Lending with your investment property cash-out refinance!  We are proud to help local investors grow their financial impact and investing power with our professional and stress-free service. Call TwinCity Lending today to begin your application.  We’ve got this. After all, helping you grow YOUR business interests is at the very heart of OUR business interest.

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