Home Equity Loan Vs Other Loans

Hi All!

I’m looking to purchase a house (all cash), rent the house out and then I would like to purchase another house. I’ve read online about Cash-out Refinancing and it definitely seems to fit my needs but I from what I understood you need a mortgage to refinance.

What are my other options? Is delayed refinancing recommended? Will the bank treat me differently for renting the house out vs if I was living in the house?

Thanks in Advance!

Say 1M home, you buy with 25% down, 750k mortgage, you get 5% mortgage interest rate.

Say 1M home, you buy cash, then cash out 750k mortgage, you get 5.5% mortgage interest rate

Which one makes economic sense?

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So the best option is just to take out a regular mortgage? No way to beat the system? :slight_smile:

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All cash might make your offer more attractive, and make seller give some discount. But the market is already soft, and you should be fine mostly.

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Thanks for answering!
Let’s say that purchasing the house is not the issue. After I own the house it will not be my primary residence, I will rent it out. Will the bank view the loan as a commercial loan or residential?
Is there any banks that are recommended to use? That is more customer friendly?
What would be the most cost-effective loan if I wanted to then purchase another house with the money form the loan?

Cash out refinance is still a residential loan, but interest rate might be slightly higher.

If you don’t have 2 years of landlord experience, lenders may not count your rent as income. So you may have to have enough income to qualify for the mortgage.


Thank you for taking the time to answer and help me pick this apart. I guess what I’m trying to understand what type of mortgage would be best for me. There seems to be so many options and slight differences it’s hard to understand which would be best.

Right now I’m looking into a home equity loan and cash out loan. What are your thoughts on those loans?
I’ve been having a hard time reaching the loan officers to get more accurate info from them.