Cash-Out Refinance

A cash-out refinance replaces your existing mortgage with a larger one and hands you the difference in cash, which investors often use to pull equity out for the next purchase. On investment properties the new loan-to-value is usually capped somewhere near 70 to 75 percent, so you cannot tap all of your equity.

The trade-off is that you now owe more, often at a new rate, and a higher balance or rate can erase the cash flow the property was generating. Lenders also impose seasoning requirements, commonly 6 to 12 months of ownership before you can refinance, and these limits vary by lender and program.