Author Topic: Cash Out Refi vs Buy Direct From Family  (Read 540 times)

RangerOne

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Cash Out Refi vs Buy Direct From Family
« on: October 30, 2017, 02:18:11 PM »
Hi All,

We are considering purchasing a condo in san diego currently owned by my in-laws. We will be able to make 20% with a fairly large gift of equity. And I believe by California law we should be exempt from a Tax adjustment due to the sale if we fill out the proper paperwork withing a 3 year purchase window. The value of the property is $516k which would be under the million dollar exclusion for parent to child sale of property not triggering a tax assessment.

My main question is, a realtor my family has used in the past also processes loans. He is recommending we get added to the title of the Condo and do a cash out Refi in 6 months to buy. However he was showing me numbers of what the final interest rate on the mortgage and closing costs would be assuming we were able to lock today.

My concern is the interest rate was almost a quarter percent higher than I saw online from reasonable benchmarks like better and nerdwallet. Also it seemed like even at 0 points there are some hefty fees for the cash out refi adding up to almost $5k for the base loan. Granted for a typical mortgage I would expect to pay about $4-6k in closing costs but it sucks when you are already starting a quarter point interest behind..

Do any of you have experience with cash out refis? Do they typically have worse interest terms or higher costs than get a mortgage for a purchase?

RangerOne

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Re: Cash Out Refi vs Buy Direct From Family
« Reply #1 on: October 30, 2017, 02:20:20 PM »
Just a side it is clear the cash out refi requires far less paperwork. But personally the complexity of paperwork is not relevant to me. I only care about which option is cheapest to close and carry. And that appears to be the direct purchase from what little I can see. Assuming I can successfully get California to approve the tax adjustment exemption.

Bruinguy

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Re: Cash Out Refi vs Buy Direct From Family
« Reply #2 on: October 30, 2017, 09:22:42 PM »
I think they are two different things. If you refi, then won't your parents will still be on title?  If you want to own it, then you will need to purchase it.  I think you should be able to get the same rate either way. It is possible that the fees could be less on a refi, but could depend on the current lender.  In any event, you should be able to find out. Ask for info on both or get other quotes.

RangerOne

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Re: Cash Out Refi vs Buy Direct From Family
« Reply #3 on: November 02, 2017, 11:58:06 AM »
In this case we can use a refi to buy out my in-laws loan, and then formally remove their names from the title and all hoa paperwork...