I have a rare opportunity to purchase a beach front condo. I have about 350,000 equity in my current/main property (home). I owe about 95k, and am on pace to pay it off in 6-8 years.
My wife and I refinanced from 30 yrs down to 15 a few years ago, and pulled in a 4.85 interest rate. I was never a believer in paying down a mortgage early , but could not get the wife to understand the ‘rule of thumb’, per se: Run the mortgage for as long as possible, and use freed up money to outperform the low mortgage rate we had via investements.
So, what I’d like to do is refinance to 30 years for 150,000-160,000 and turn around and plunk down the 55-60k from the cash out refi on the investment beach property (which is in a highly desirable area which has been ‘bubble’ proof in this time of record number of listing and slow sales. Beachfront and bayside properties with docks in this area show no signs of being affected by the housing bust. In the nearby areas supposedly affected by the housing bust are NOT gowing down in price, but are appreciating slower (if you can call that a bust).
Using the refinance to pull cash out for a good investment makes perfect sense to me. I’d still have 300,000 in equity in property #1, and a fairly paltry mortgage payment for my 450,000 dollar house. I’d merely have taken the equity and moved it to another property, giving me two growing investments.
I guess what I am looking for is some opinions, mainly about the cash out from the refinance. I learned that cash out from refinance is bad if you are looking to buy cars, take vacations, etc…but cash out from refi would be wise if one was going to put in an addition, or invest in a second property, etc.
You will have to trust me on the investment opportunity. Hot area, always stable, per capita/household incomes rising, stable taxes, etc. I’ve been watching this area for 20 years, since I was in college.
Any thoughts…experience…etc?