1. Cash-Out Refinance
How it works: You replace your current mortgage with a new, larger loan and take the difference out in cash.
Pros:
Often lower interest rates compared to other methods.
Longer repayment terms.
Cons:
Closing costs (typically 2–5% of the loan amount).
Resets your loan term (could be 15, 20, or 30 years).
Tougher underwriting for investment properties vs primary residences.
2. Home Equity Line of Credit (HELOC)
How it works: You get a revolving line of credit based on your property’s equity.
Pros:
Flexibility — borrow what you need, when you need it.
Pay interest only on what you draw.
Cons:
HELOCs for investment properties are harder to get and may have higher rates.
Variable interest rates (payments can increase).
3. Home Equity Loan ("Second Mortgage")
How it works: A lump-sum loan secured by your property's equity, separate from your existing mortgage.
Pros:
Fixed interest rates and predictable payments.
Cons:
Higher rates than primary mortgages.
Separate loan payment on top of your existing mortgage.
4. Sell the Property
How it works: You sell the investment property and realize your equity as cash.
Pros:
Immediate full access to equity.
No debt obligation.
Cons:
Capital gains taxes may apply.
You lose future appreciation and cash flow.
5. Portfolio Loan
How it works: A loan based on a group (portfolio) of your properties' combined value and cash flow.
Pros:
Useful if you have multiple properties.
Lenders may be more flexible on qualifications.
Cons:
Complex underwriting.
Higher costs.
6. Private or Hard Money Loan
How it works: Short-term, high-interest loan based on property value, not personal credit.
Pros:
Fast funding (days instead of weeks).
Less strict underwriting.
Cons:
Very high interest rates (often 8%–15%+).
Short loan terms (often 6–24 months).
7. Seller Financing (if you're buying another property)
How it works: If you own a property free and clear, you could "sell" it and carry financing, creating cash flow and upfront cash through a down payment.
Pros:
Passive income from note payments.
Cons:
Risk if the buyer defaults.
Key Factors to Think About:
How quickly do you need the cash?
How much do you want to borrow?
How long do you want to be repaying it?
How the new debt impacts your overall portfolio.
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