How I Made $84,000 Refinancing My Home in Austin
One of our founders, Kristina Modares, bought a home in East Austin in 2017. In the past 3 years, she has made numerous improvements and added a lot of value to her home. Because of this she decided to cash out refinance her home in 2020.
So, what exactly is refinancing and cash out refinancing?
This means that Kristina applied for a new mortgage on her East Austin home and improved her loan terms. This mortgage will then reset, starting another 30-year clock. If you already own your home, this is a great thing to do when interest rates decrease, like they currently have. But even more specifically, Kristina used a cash-out refinance. So, what does that mean?
So, since Kristina put money into her home located in an up-and-coming neighborhood, her home increased in value from 2017 to 2020. This meant she could take out cash from this refinance and use it on other things.
You can use the money you take out from a cash out refi on anything you want, but the smarter use for that money (remember you still have an interest rate) is to invest it! Kristina did just that by using the cash she pulled out of her home to purchase a vacation home with her sister, which earns her passive income through short term rentals when her family isn’t using it.
Now that we understand what exactly a cash-out refinance is, let’s learn about the process! In order to cash-out refinance her home, Kristina had to talk to a lender. We work with many reliable and kind lenders and can recommend a few if you are interested in refinancing or buying a home!
So now let’s check out Kristina’s home and her original costs:
If you look at the original price of the home, and the cost of the renovations (SO WORTH IT) the house value appears to be around $334,000 ($280k from the original price + $54k from renovations). Kristina had to get her house appraised to see what the new value is based on these numbers, as well as the appreciation of the neighborhood and other factors. Ultimately, her house appraised for $415,000!
Numbers can be a little confusing - so let’s break it down! The house was appraised at $415k. Kristina can pull out a maximum of 80%, which she chose to do. 80% of $415k is $332k - the refi on her new loan. Out of that $332k, Kristina is paying off $237k, leaving us with $95k. After you take out loan fees and other costs, you are left with $84k to pull out.
So wow, $84,000 dollars at her disposal! And through all that, her monthly mortgage payments only increased by $230 dollars - not bad! Now, what is Kristina going to do with that money?
After weighing her options, Kristina ended up using that $84,000 to buy a vacation home in Florida with her sister. They are able to cover their monthly mortgage payments through short term rentals with additional passive income (otherwise known as house hacking)!
While Kristina’s initial investment in her first home didn’t pay off overnight, waiting 3 years and making small renovations along the way REALLY paid off in the end. While techniques like house hacking help with immediately covering your mortgage, it’s always important to think big picture and plan for your long-term goals in 3-5 years!
Interested in a cash out refinance? Fill out the following form to see what the cost would be for you!
We think the idea that you can pull out a large amount of cash from your own home to use for whatever you want is pretty exciting!
I’m sure this has also brought up some personal questions you have about buying a house, refinancing and investing. We are always happy to educate more people and welcome your questions! Just know that you will truly get the best education through getting started and jumping into the arena. We are here to walk you through the process of buying and also educating you along the way.
