Читать книгу Flipping Houses For Dummies - Ralph R. Roberts - Страница 70

The easiest way to unlock a chunk of equity is to refinance your home, giving you a whole new mortgage, paying off the old mortgage, and leaving you the rest. Ideally, you refinance a mortgage not only to cash out equity for investment capital but also to snag a lower interest rate or shorter term, so you pay less interest over the life of the loan.

Suppose that you have a $200,000, 30-year mortgage at 8 percent with a monthly house payment of $1,467.53. You’ve owned the house for 10 years and still owe $175,000 on the mortgage. If you refinance for $250,000 (the home’s current appraised value) and take out a 20-year mortgage at 4.5 percent, now you have a house payment of $1,581.62 and you walk away with the $75,000 equity that was locked up in the house (the refinanced amount of $250,000 minus the $175,000 to pay off the old mortgage) to use as investment capital.

Well, that certainly looks rosy, but what have you lost in the transaction?

 You now owe $250,000 on your home and have no equity built up in it.

 Your new house payment is $114 more than your previous house payment.

 Over the life of the loan, you’re scheduled to pay $27,360 more than you would have paid by sticking with your original mortgage.

In short, you’ll pay $27,360 over the course of 20 years to gain access to $75,000 now. But think of it this way — by putting your equity to work for you in successful flips, you may be able to turn that $75,000 into far more than $27,360. In fact, you might make that much money and then some on your first flip!

Of course, you don’t have to unleash all the equity in your home. To build on the previous example, you could take out a 20-year, $225,000 loan at 4.5 percent, with a monthly payment of $1,423.46, freeing up $50,000 in equity, or a 20-year, $200,000 loan at 6 percent with a monthly payment of $1,265.30, freeing up $25,000 in equity. Your choice depends primarily on your comfort level and risk and debt tolerance. The more equity you leave in the house, the greater your cushion, but that also means less investment capital to work with.

When refinancing, take the following precautions:

 Don’t refinance into a loan that has a prepayment penalty — a provision in the loan agreement stating that if you pay off the balance of the loan early, you have to pay extra. The amount you’re required to pay is usually a percentage of the balance at the time you pay off the loan or a certain number of months of interest. The purpose of a prepayment penalty is to ensure that the lender receives some compensation for its work.

 Don’t refinance a fixed-rate mortgage into a new adjustable-rate mortgage. Adjustable-rate mortgages are unpredictable; you can get burned by a sudden increase in the interest rate and your monthly payments.