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Can You Use a Cash-Out Refi to Buy a Second Home in Albuquerque?

Do you own a home in Albuquerque and thinking about buying a second home? You can use the equity in your home to your advantage. One way is to purchase a second home.

One option is to use a cash-out refinance to acquire a second home, but you need to know some things first.

How do Cash-Out Refinances work?

By refinancing your mortgage, you can convert the equity in your home into cash. The difference between the new and existing mortgage is paid to you in cash.

A common reason people refinance is to obtain more favorable terms than those offered by their current loan. A refinance might lower your monthly payments or allow you to take advantage of a lower interest rate. In a cash-out refinance, your primary objective is probably to withdraw cash from the equity in your home.

When you refinance your home, you are providing collateral for a new loan. Then you get a new mortgage for a larger amount than what you currently owe.

Buying a House with a Cash-Out Refi

The value of your home currently must be significantly higher than your remaining mortgage balance in order to qualify for a cash-out refinance.

You can withdraw up to 80% of the current value of your home, minus any remaining balance. The money you receive can then be used as a down payment for your next property. Like a conventional refinance loan, you must still qualify.

In most cases, lenders will require at least a 620 credit score and a debt-to-income ratio of less than 50%. For a cash-out refi to be beneficial, you’ll need to put down anywhere between 15 and 25% of the purchase price. Most lenders will accept a lower down payment on a primary residence.

Lenders don’t have any guidelines against using the proceeds you get from a cash-out refinance to put toward the down payment of another property.


You can choose either a variable-rate or a fixed-rate loan when you apply for a cash-out refi. Your loan payment can increase if the interest rate is variable.

A cash-out refinance may come with a higher interest rate than your original loan, meaning you’ll pay more in total during the term of the loan.

You need to decide whether the additional interest you’ll pay when you buy another home would be worth it. The debt repayment period of your current debt is also extended, so it’s not always the best choice.

There may be closing costs of up to 5% on your new refinance mortgage, taken from your cash payout. These costs cannot be rolled into the loan.

A home equity loan against your house is another option to consider. These loans have no closing costs, which is a big advantage. If your current mortgage has a lower interest rate than what you qualify for, then this may be less expensive than a cash-out refinance.

Last but not least, the biggest downside to a cash-out refinance is that your primary home becomes the collateral, even if you are using it to buy another home. If you default, your primary home can be repossessed.


62 Calle Monte Aplanado NWAlbuquerque, NM 87120

10 PINON RIDGE Drive, Placitas, NM 87043

Amazing Hilltop Lot is setting for this Custom Santa Fe style home. Incredible mountain and sunset views. Bright light and open great room floor plan, gorgeous quality windows, with beautiful Saltillo tile floors throughout. High ceilings throughout accented with wood beams and tongue and groove. Dream kitchen with beautiful granite countertops custom cabinets and 2 huge walk-in pantries, kitchen island, & bright sunny breakfast nook. Water is stored in a 1200 gallon tank and is on a water fill system. Water delivered to fill tank by East Mountain water for $150 a month. Exquisite owner suite privately situated from other bedrooms w/Kiva style fireplace and Vigas accents on the high ceilings. Amazing custom shower with glass block accents and cedar lined his and her walk-in closets.

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Albuquerque New Mexico Real Estate YOUR SOURCE FOR ALBUQUERQUE REAL ESTATE! Sandi Pressley offers unparalleled service to ALL clients in Albuquerque and surrounding communities in the New Mexico real estate market. Sandi's motto is "Putting You First." Your complete satisfaction with our service and representation is our number one priority. As a native of Albuquerque, Sandi Pressley has been dedicated to serving her client's real estate needs for over 45 years. Sandi has achieved a goal unprecedented by any other Realtor of being the #1 Top Producing Realtor for 38 consecutive years in all of Albuquerque as well as the entire state of New Mexico. She is also the #1 Top Producing Realtor for the entire Western Region and 8th in the Nation with Coldwell Banker National. Sandi Pressley serves the entire Albuquerque New Mexico real estate market including the surrounding communities such as Rio Rancho, Placitas, Corrales, Bernalillo, Northeast Heights, North Albuquerque Acres, Sandia Heights, High Desert, Foothills, Four Hills, UNM, Nob Hill, Ridgecrest area, Uptown area, North Valley, Northwest Heights, Paradise Hills, South Valley, Southwest Heights, Bosque Farms, Los Lunas, Cedar Crest, Tijeras, and all East Mountain areas. Whether you are considering buying a home, selling a home or both, we know these areas inside and out.

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