Owners who locked in a low rate a few years ago often ask why anyone would borrow at today’s rates. The short answer is that a low rate on one property does not buy the next one. Equity does, and equity only works when it is put to use.
Perspective on rates
The mortgage rates of 2020 and 2021 were the lowest on record. Measured against the last fifty years, today’s rates are ordinary. What has changed is that each purchase takes more cash, and that thins out the competition.
What a high-rate market offers
- Motivated sellers. Fewer buyers can qualify, so prices and terms are more negotiable.
- An inflation hedge. Rents and property values have tended to rise with prices over time, while a fixed payment does not.
- A refinance later. If rates fall you can refinance. If they rise, your fixed rate protects you.
- Limited supply here. Hilton Head is an island with strict development limits. There is very little new land to build on.
Using equity you already have
A cash-out refinance on a rental, up to 80% loan-to-value with us, turns idle equity into the down payment for another property. One paid-down villa can become two or three income-producing ones.
What to be careful about
- The refinanced property must still cover its new, higher payment. A DSCR loan tests exactly that.
- Vacation rental income is seasonal and depends on travel demand.
- Insurance costs on the coast have been rising and belong in every projection.
- Do not count on appreciation to make a deal work. It should work on today’s numbers.
If you want to see what your equity could support, ask us for a free property analysis.