Question: Hopefully some of you experts can answer my questions.

I am planning to rent out my first house (which I have lots of equity) and purchase a second home.

My questions are:

1) If I refinance my first home mortgage at a lower interest rate and lower payments, how will that affect my FICO score since I am applying for a new home loan for the second house? Will the FICO score be better since the monthly payments are lower? Or should I refinance later after getting the new home loan.

2) What are your opinions on refinancing the first house with a higher amount to use part of it as a downpayment on the second home?

Thanks in advance,

Answer: It likely will not make much difference since your total debt load will stay about the same. If you do a cash out re-fi, then you will probably take a small drop. That is a pretty good way to do it. The only concern that I would have is if the first house can be rented for enough money to make sense as an investment. That means getting between 1.2% and 1.5% of the value of the house as rent each month. Otherwise, you would be far better off forgetting the rental idea, sell the first house, and invest the money.

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