🏡 Better Homes Pull money out of equity in my house?

[Shawn1112]

So I know there are a ton of smart dudes on here when it comes to investments, and just finances in general. I hope to be retiring in 15ish years which will be here before I know it. The Wife and I are dead set on retiring to Mexico or perhaps Puerto Rico. We have just under 14yrs left on our mortgage and seeing what similar homes are going for in our area and not as nice as ours. I’m pretty confident I have $150k-$175k in equity in our home.

With rates being low, would it be wise to pull let’s say $100k out, refi back into a 30yr. Take that $100k, add whatever else is needed which wouldn’t be much. Go buy our small house or condo in either Mexico or PR cash and Airbnb that property out. Kinda make my equity money go make me money. Then when we retire in 15yrs the retirement home is paid for. Hopefully our house now appreciates a little in those 15yrs we sell and walk away with a few bucks.

This retirement home purchase wouldn’t be for a year or 2. Still have to do more homework. But I would probably have to refi and pull the equity out soon to still take advantage of the rates. In Mexico I’d buy in or around Maztalan, I have people that live there now that are like a 2nd family to me. So they would totally maintain it for me and do what’s needed to make the Airbnb work. In PR, I’d probably have to hire a service to manage it for me. Again I still have homework to do and I’m just thinking out loud with pulling the equity out. Just wondering if it’s a good idea, bad idea or somewhere in the middle lol.

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[Flyn]

Interest rates were 3.11% for 30 year fixed last week. Can you make more than that with investments/rentals? The big downside is if the market tanks and you go upside down on both places.

My home is paid for so I think about selling or pulling the money out but Amy is totally opposed to it. Happy wife, happy life?

If I see the RE market start tanking, I'd be more inclined to sell and rent for a couple years while investing the rest. Then buy another home after the prices drop substantially. No signs of that happening yet, though.

I was thinking about selling and building a new home since I have a builder who could put me in a new home for less than my home is worth. Problem is he just cranked up his rates last week by $50K which made the deal a lot worse.

 

[Shawn1112]

Interest rates were 3.11% for 30 year fixed last week. Can you make more than that with investments/rentals? The big downside is if the market tanks and you go upside down on both places.

I’m not sure on how much I’d make with the rental property. That’s part of the homework I’d have to do. I wouldn’t be too concerned with the market on that home as I’m paying cash for it. Plan on staying there until I die, so it would eventually rebound.

 

[Flyn]

Check rental prices with Realtors in the area you are thinking about buying in. They'll be happy to give you advice if they can have you as a future customer. You're not obligated to use them after you get the advice. Or just check rental prices yourself. There are formulas for how much a rental property will cost you and what you can expect to net.

 

[The Beast]

Interest rates were 3.11% for 30 year fixed last week. Can you make more than that with investments/rentals? The big downside is if the market tanks and you go upside down on both places.

My home is paid for so I think about selling or pulling the money out but Amy is totally opposed to it. Happy wife, happy life?

If I see the RE market start tanking, I'd be more inclined to sell and rent for a couple years while investing the rest. Then buy another home after the prices drop substantially. No signs of that happening yet, though.

I was thinking about selling and building a new home since I have a builder who could put me in a new home for less than my home is worth. Problem is he just cranked up his rates last week by $50K which made the deal a lot worse.

That’s a no brainer sell your house make money and buy a freshly built home and pocket some cash. Damn u waited to long the price went up 50k. Granted u never spoke home sizes but I’m sure you are taking about equally size homes.

 

[Flyn]

Yeah, I'd have a bigger, new home but no pool. Builder surprised me with his price increase. I talked with Amy about it several times but she did not want to do it. She loves our home and loves floating in the pool. If prices start to tank, I will revisit the idea of selling. 15% price rise this year and it's still continuing here in Florida. I told her if our home hits $400K, we need to do it.

 

[The Beast]

Shawn you said every year you get a large yearly bonus why not send them every year toward your mortgage? If you send a few hundred every month and in 5 years you are done paying off your house. Then you can focus on when you would like to retire quickly and enjoy what’s left of your life with out stress and work. By your house being paid in 5 years u can stack up the money strictly towards retiring quickly and maybe purchase your retirement home in pr or mex. I’m no expert but doing a 30 year and pulling money out at your age doesn’t seem smart.

 

[Shawn1112]

Shawn you said every year you get a large yearly bonus why not send them every year toward your mortgage? If you send a few hundred every month and in 5 years you are done paying off your house. Then you can focus on when you would like to retire quickly and enjoy what’s left of your life with out stress and work. By your house being paid in 5 years u can stack up the money strictly towards retiring quickly and maybe purchase your retirement home in pr or mex. I’m no expert but doing a 30 year and pulling money out at your age doesn’t seem smart.

I suppose I could vs maxing out my 401k every year. My house would be paid off in 5-7 years. But from reading things in the retirement thread. It sounds like with these super low rates it’s not wise to pay extra on your mortgage. I’d have to double check, but I think I’m locked in at 2.75% right now.

Im the farthest thing from being an expert on this stuff. But I’m a very quick learner and I’m eager to learn. Hence the reason I started this thread.

 

[GTPpower]

A year ago if you asked me this question, I would have paid off the current home, then invest everything in mutual funds until ready to retire, then buy in Mexico.

Today, my position has slightly changed. I would pull equity out of the house and stick that money in mutual funds. Then buy a house when you retire. I wouldn't want to mess with a rental without living there. That just seems like a higher risk without really making anymore money.

 

[Aircal]

If rates are low I would think on a rental property you would try to put as little down as possible ??

 

[01Cobra]

Risk. All of these decisions are a game of risk.

Play the market - win big or it tanks and lose big sitting deep underwater on mortgage

Don’t play the market - have cash in bank but miss out on the gains

Pick your poison. Right now social media and news media say play the market and buy those stocks, nft, crypto, and everything else cause it’s hot hot hot.

 

[Blood on Blood]

I suppose I could vs maxing out my 401k every year. My house would be paid off in 5-7 years. But from reading things in the retirement thread. It sounds like with these super low rates it’s not wise to pay extra on your mortgage. I’d have to double check, but I think I’m locked in at 2.75% right now.

Im the farthest thing from being an expert on this stuff. But I’m a very quick learner and I’m eager to learn. Hence the reason I started this thread.

You could pay off your existing house, then sign on the retirement place, rent out / pay it down.

Perfect Win Win is both places paid for. When retired, Mexico / Puerto Rico place becomes your permanent home. You the rent out the Streamwood place (current house) for ongoing income while retired.

 

[FirstWorldProblems]

Borrow then invest it, pull it out of investments if you find a good deal on a house and/or have a plan to make more on a rental than you do on investments (which won’t be easy btw)

Rates are going up soon, and according to the Fed inflation is going to stick around for a while

If you’d have taken $100k out of your house a year ago and invested it you’d have paid $3k-ish in interest but earned $15k+ in the market, and you’d be paying the bank back with dollars that are worth 6% less than the dollars you borrowed.

Obv there is risk involved, the market could tank, but playing the long game you’ll always earn way more than 3% a year on average

Low interest AND high inflation (the best combination for borrowing) doesn’t happen often and you never get both for long

 

[Ron Vogel]

Risk is probably why I’d never do it again.

So in 2007 we took out an equity loan…2007

Market tanked in 2008. I was also suddenly out of work with no prospects.

We eventually had to short sell the house.

Equity loans aren’t included in short sells.

We ended up owing $24k, and no way of paying it back. I had started a new career and was making $16.50 an hour supporting a family of 6.

I got really lucky when they came to get paid a few years later. I told them I would give them 3k and the forgive the debt, or I file BK and they get nothing. They took the money

 

[sickmint79]

it seems like a cash out refi is the better option vs. a heloc.

if you prefer mexico, plus have friends there that could look after your place, that would seem more advantageous than PR.

note that what you might want for a long term/retirement home may not be the same thing airbnb folks are looking for. not sure what the airbnb/occupancy market is like down there, keep in mind that an investment property should really be cash flow positive. multiple sites to list/rent from down here, including some spanish only ones (inmuebles24 is a popular one) - i'll note it is a challenge for me to personally find a monthly furnished rental place; most places want 1 year contracts, even if furnished, at least in cdmx. i'm on a private agreement with someone i met on an airbnb listing now. this is probably not so relevant in mazatlán as it could be quite different there though, both in local listings as well as what people are seeking.

you certainly have additional risk with the multiple properties. so should be considering worst case scenarios if things go to shit. what if your wife loses her job, you have a shit year, the property needs a bunch of repairs, etc.

also not sure how ownership works here. maybe IZZy can chime in on that. you can buy property (and work) with permanent residency here - which you can apply for after 4 years of temporary residency, or by age/income maybe just apply for directly? i didn't look into it a ton. you would go to the mexican consulate and apply, i think they can even do it in 1-2 days. iirc permanent residency via economic qualification had you proving you have 175k saved up and/or some certain monthly income. i'm not sure what age requirements may be around it. apparently it differs from consulate to consulate. in any case, if approved, once in mexico you would go to some immigration office and get your permanent residency card. unlike many places in the world (including the US) - there's actually a 0 days in country requirement to keep it here. so it actually is a super flexible awesome option to have for vacations, retirement, health care, etc. you're not a citizen but you have most of the privileges of one, outside of voting.

Check rental prices with Realtors in the area you are thinking about buying in. They'll be happy to give you advice if they can have you as a future customer. You're not obligated to use them after you get the advice. Or just check rental prices yourself. There are formulas for how much a rental property will cost you and what you can expect to net.

the market down here does not seem nearly as mature/transparent/etc. as the US. there is no MLS afaik and certainly no zillow. someone listing their home for sale apparently means just putting out a big sign in front of it with a phone number. in mexico city it seems like plenty of building properties are largely empty, with the developer/builder just sitting on some high asking price and happy to leave the units empty vs. lower it. i'm sure someone local can help, bet it's hard to find someone really good at finding a deal on a retirement/rental property though.

Shawn you said every year you get a large yearly bonus why not send them every year toward your mortgage? If you send a few hundred every month and in 5 years you are done paying off your house. Then you can focus on when you would like to retire quickly and enjoy what’s left of your life with out stress and work. By your house being paid in 5 years u can stack up the money strictly towards retiring quickly and maybe purchase your retirement home in pr or mex. I’m no expert but doing a 30 year and pulling money out at your age doesn’t seem smart.

if debt is cheap, you are better off investing the money than paying down debt.
if there is a lot of inflation, your debt also becomes cheaper/easier to pay back over time in terms of real dollars.
now is a great time to borrow a bunch of money at a low interest rate and put it into something. the hard part is just finding what that something is, because a lot of stuff already seems bubbly and overvalued, and has for some time. i would not be putting effort into paying down debt, i am currently debt free and wish i was carrying a mortgage.

Risk. All of these decisions are a game of risk.

Play the market - win big or it tanks and lose big sitting deep underwater on mortgage

Don’t play the market - have cash in bank but miss out on the gains

Pick your poison. Right now social media and news media say play the market and buy those stocks, nft, crypto, and everything else cause it’s hot hot hot.

nft/crypto would be a good way to take on maximum risk, so for the love of god don't rip out a heloc and dump it all into floki inu and a bored ape lol.

 

[sickmint79]

fyi this place came up in a nomad group i'm in just now

 

[Intel]

Why would you buy a place in Mexico or PR in cash? Put down the minimum, rent it out if that is your intention and then when you retire and sell your house here pay off the house. Why give up cheap mortgage rates when that money could be working harder for you elsewhere?

 

[sickmint79]

probably should also note there is currency risk if you take out a mexican mortgage in mexican pesos, although that can also result in an advantage for you. maybe people do take out dollar ones here too or you can take one out at home for property here? dunno what is normal but know this potentially exists.

 

[IZZy]

it seems like a cash out refi is the better option vs. a heloc.

if you prefer mexico, plus have friends there that could look after your place, that would seem more advantageous than PR.

note that what you might want for a long term/retirement home may not be the same thing airbnb folks are looking for. not sure what the airbnb/occupancy market is like down there, keep in mind that an investment property should really be cash flow positive. multiple sites to list/rent from down here, including some spanish only ones (inmuebles24 is a popular one) - i'll note it is a challenge for me to personally find a monthly furnished rental place; most places want 1 year contracts, even if furnished, at least in cdmx. i'm on a private agreement with someone i met on an airbnb listing now. this is probably not so relevant in mazatlán as it could be quite different there though, both in local listings as well as what people are seeking.

you certainly have additional risk with the multiple properties. so should be considering worst case scenarios if things go to shit. what if your wife loses her job, you have a shit year, the property needs a bunch of repairs, etc.

also not sure how ownership works here. maybe IZZy can chime in on that. you can buy property (and work) with permanent residency here - which you can apply for after 4 years of temporary residency, or by age/income maybe just apply for directly? i didn't look into it a ton. you would go to the mexican consulate and apply, i think they can even do it in 1-2 days. iirc permanent residency via economic qualification had you proving you have 175k saved up and/or some certain monthly income. i'm not sure what age requirements may be around it. apparently it differs from consulate to consulate. in any case, if approved, once in mexico you would go to some immigration office and get your permanent residency card. unlike many places in the world (including the US) - there's actually a 0 days in country requirement to keep it here. so it actually is a super flexible awesome option to have for vacations, retirement, health care, etc. you're not a citizen but you have most of the privileges of one, outside of voting.


the market down here does not seem nearly as mature/transparent/etc. as the US. there is no MLS afaik and certainly no zillow. someone listing their home for sale apparently means just putting out a big sign in front of it with a phone number. in mexico city it seems like plenty of building properties are largely empty, with the developer/builder just sitting on some high asking price and happy to leave the units empty vs. lower it. i'm sure someone local can help, bet it's hard to find someone really good at finding a deal on a retirement/rental property though.

if debt is cheap, you are better off investing the money than paying down debt.
if there is a lot of inflation, your debt also becomes cheaper/easier to pay back over time in terms of real dollars.
now is a great time to borrow a bunch of money at a low interest rate and put it into something. the hard part is just finding what that something is, because a lot of stuff already seems bubbly and overvalued, and has for some time. i would not be putting effort into paying down debt, i am currently debt free and wish i was carrying a mortgage.

nft/crypto would be a good way to take on maximum risk, so for the love of god don't rip out a heloc and dump it all into floki inu and a bored ape lol.

I’m not well versed on real estate but I know for a fact Americans own property in Mexico so it shouldn’t be a big deal, like you mentioned about the real estate market in Mexico is not as straightforward as in the US, gotta be very careful and do your research before making any kind of deal, there is more scams there than you can imagine.

 

[IZZy]

probably should also note there is currency risk if you take out a mexican mortgage in mexican pesos, although that can also result in an advantage for you. maybe people do take out dollar ones here too or you can take one out at home for property here? dunno what is normal but know this potentially exists.

Taking out a mortgage in Mexico is not really doable, the banks won’t consider your US income so you’d have to find someone in Mexico that can prove the necessary income to co-sign for you, plus interest rates for a mortgage in Mexico hover around 10%

Paying cash is usually the only option from what I’ve seen.

 

[Turk]

Personally I wouldn’t do it because it’s too risky. Rich people, though, leverage loans and debt to make more money just like this. With that being said, poor people also do the same and lose everything.

 

[IZZy]

Shawn if your goal is to move to Mexico and you are 100% sure your best bet would be to buy a property in Mexico in cash as soon as you are able to, the property will continue to appreciate since housing in Mexico is always in demand, renting it could be a headache unless you have someone local that can help you out when things happen.

As to how to get the money to buy it I’ll let the dudes with the better understanding of economics explain which path is the one with the least amount of risk.

 

[FESTER665]

More importantly is will there be a discounted rental rate for TCG?

 

[ZXMustang]

We just closed on a refi. Got 2.875 rate and pulled a ton of cash out, but we left it to where we are still under the 80% LTV and have no PMI. At the end of the day our payment just about stayed the same and we padded the bank account with a huge chunk of change while still leaving a lot of equity on the table shall we decide to move. If you are ok staying where you are, then take that liquid cash out and dont let the market decide if you will still have it in 3-5 years. You never know with the hyper inflation we got goin on here, there might be a small bubble pop. And I'd rather have that cash on hand to put back into the house if I need it rather than a descending market taking it back without my permission. Thats my opinion. My parents are doing this right now too with their IL house.

 

[GLADIATOR]

Shawn1112 we just looked at properties in Mexico. We were really let down at some of the areas we were told to look at. If you are going to rent out or ABNB you need to be close to the beach. You can get something nice for $100k. Check out some properties while you are there. There are bilingual real estate agents that can help you. As far as the financing, I am under the impression you can get a loan with US income. I could be wrong though. I haven’t tried to get a loan . But the RE agent we spoke with said we would have to apply to see what we qualified for. He did say loans are 9% and up. Our friend lived in Cancun for a year and she got tired of the heat. Take that Into account too. Some spots are hotter than others.