Financing in 91316>Question Details

Bella Master…,  in Edgewater, Chicago, IL

I just rented my house in chicago and am thinking of buying something in LA. I have a lot of equity in my old house. Should I refinace or cash out?

Asked by Bella Masteran, Edgewater, Chicago, IL Sun Jan 30, 2011

I have perfect credit score of 822 and I have alot of equity in my house that I just rented out. Should I refinance or take cash out and refince to a lower percentage to lower my payments. My property is in Chicago and I am thinking of buying something in LA.

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Hi Bella,

I would recommend that you visit several areas/neighborhoods within the Los Angeles area before you make a decision so that you may evaluate your needs vs. cost of housing here. If you keep the property in Chicago, you will need at least 25% down to purchase here. Refinancing may not be worthwhile unless you can save a point. I would also recommend that if you decide to make the move here, rent for 6 months or so in the area you like best to make sure. There are plenty of rentals available in nice neighborhoods (Encino, Sherman Oaks, Studio City) . Contact me if you want to take a look or if you need a reputable lender reference.
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1 vote Thank Flag Link Sun Jan 30, 2011
Hi Bella,

I would assume your home in Chicago is a long term hold (more than 5 years) being that you just rented it out.

Based on the cost of borrowing money being historically low and the current prices of homes, I do think it is in your best interest and a great time to cash-out some equity and purchase a home on the West Coast.

Just did a quick quote from today's rates and determined that a 30 year fixed inerest rate on an investment, cash-out refinance to 70% loan-to-value and a 822 fico score is 5.125%.

0 votes Thank Flag Link Mon Jan 31, 2011
Kim's answer below is the best of the lot. She is spot on in saying that talking to a lener id best. Refinancing could better enable you to make a new purchase through lowering your carrying cost and/or providing more money for a down payment. to try and speculate on this is to no advantage to you. You really need someone to crunch the numbers.
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0 votes Thank Flag Link Mon Jan 31, 2011
Hi Bella, I see a few questions in that question. The main two I see are 1) should I refinance to a lower rate? The answer to that is to find out if you will be saving very much money by doing so. Also, don't forget that your mortgage starts over at 30 years again when you refinance. You may be close enough to paying off the home, it isn't worth it.

2) Should you take money out of that house to buy something in LA? I think it is a great time to buy in LA, so I encourage you. The investor in me, however, will want to make sure that you don't cash strap yourself financially. I'd investigate the cost of homes here, figure out what you can afford first, then, if all signs point to go, refi the house, pull cash out and put it down on something here.

I knew lots of investors that got burned by pulling equity out and purchasing other things. Unless you have experience doing so, please be careful and talk to others who have done it. I know from experience there are things that you don't think about in situations like this, and those are the things that bite you later!
0 votes Thank Flag Link Sun Jan 30, 2011
Hi Bella,

I think it really depends on your long term goals. I'm a buy and hold kind of girl so I would hold on the property in Chicago if possible. It's great that you have it rented out, and if you can afford to buy something in LA at the same time, you have a lot of great opportunities here with low interest rates, and low prices (for California!). As others have advised you, you should speak to a reputable lender regarding what makes sense as far as refinancing or taking cash out. BTW I am from Chicago originally...

Let me know if I can be of further assistance...

Best regards,

0 votes Thank Flag Link Sun Jan 30, 2011
It depends on how you feel about it. You should sell if you want to avoid risk. Refinance if you can, and if you believe in the market and want to try holding on for awhile. Good luck, and let me know if you need any assistance.

Richard Schulman
Keller Williams Westside Realty
#1 Listing & Selling Agent
(310) 482-0173
0 votes Thank Flag Link Sun Jan 30, 2011
I think you need to decide if you are going to buy in LA for sure. If you are, you will know the answer when you find your home. If you decide now, you may have to borrow against your property in chicago twice.

Decide if you are going to buy in LA. Find a house in LA and then decide how much money you will need for the downpayment. Do a feasability study now, look at it on paper after you see what homes cost in California.

Call my anytime if you want to talk it out with someone, I have been selling homes for 31 years, sometimes you just need to talk these things out.

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0 votes Thank Flag Link Sun Jan 30, 2011
It all depends on your current interest rate and your loan to value ratios. Since your property is no longer owner occupied, you may not get the most favorable interest rate available, however since you have a lot of equity and great credit you will still get a pretty decent rate. Is your current interest rate more than 5%? If so, talk to a local mortgage broker who may be able to get you into a better situation.

Regarding buying something in LA, are you looking for an investment property? Let me know if I can help find The Right Propertyy at The Right Price for you.
Best Regards,
Catherine Bedrossian
Home Sales Pro
(310) 383-4212
0 votes Thank Flag Link Sun Jan 30, 2011
Hi Bella

I think you should speak to a loan agent about your current property in Chicago to see exactly what your options would be. Then, after you have that information you could see what your options are here in Los Angeles (Encino). Feel free to contact me for assistance. Thanks.

Sara Mehrpouyan
Rodeo Realty
Direct 818-903-2040
Dre Lic#01712757
Los Angeles & Ventura County
0 votes Thank Flag Link Sun Jan 30, 2011
Now that you have a tenant in your Chicago home, it may affect your interest rates, costs, terms and option to cash out, since you are no longer an owner occupant.

Talk to an experienced reputable loan officer to help put the pieces of the puzzle together for you!

If you'd like a recommendation, let me know. I have an amazing loan officer who is based out of the northern suburbs, and he can help you Ben Franklin through your options.
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0 votes Thank Flag Link Sun Jan 30, 2011
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