Understood, thanks for taking the time to respond. I really appreciate it!

I wouldn’t say that. I would say it depends on the math. What’s the rate of the old loan, what’s the rate of the new loan, how much will the property rent for, how “in demand” is the area (lower chance of extended vacancy), how does the expected rent compare to your mortgage and maintenance costs, how much is it going to cost you to buy a new place to live yourself and move there?

It’s not an inherently bad or inherently good idea. It’s case specific, depending on the math above.

You need to sell it as soon as possible. The price is going to drop like a stone. Every day you hold the car you'll be losing money.

So then is the general view that using cash-out refi money to purchase a second home, in my case using the VA loan, is usually not a good idea?

Try selling a 50k car right now. Yeah. It's negative equity.

Obsolete? It has traditionally delivered a 10%+ return per year for decades.

Good points…. This is going to start as a taxable account so o will start with ETFs…. I do also want to look into a fund for my IRA too which I have through Vanguard so I assume I would just use Vanguards index or mutual fund.

Say you buy a house for $200K. When you go to refinance, you’ve paid it down to $180K and it’s now worth $250K.

For the conventional refinance loan, they’re going to want you to have at least 20% equity ($50K), meaning they’ll loan you up to $200K on your $250K house. Since you only owe $180K on your mortgage, you can get up to $20K cash out.

It’s still money you’re borrowing though, as you just went from an old mortgage of $180K to a new mortgage of $200K.

There is no free money.

I did not realize there still needs to be 20% equity remaining after the cash out refinance. I am new to this, so thank you. I do have the disability rating so those fees are waived.

Sure, assuming you’d still have the equity that a conventional loan requires, typically 20% after the cash out.

Remember that VA loans also have funding fees, which get even higher after the first time. Unless you qualify for a waiver (usually based on a disability rating), it’s a significant extra expense and drawback to what you’re considering.

Oh interesting, thank you. The thought is to use this "equity" to help buy the new primary residence with VA loan. I am assuming if I take a loan out against first house in this example, that will work against me when buying new primary residence?

Getting an estimate at CarMax is a must, particularly if OP does a trade in.

Last new car I bought, by going to CarMax first I was able to take the estimate and get an extra $1000 on trade in from the new car dealer. Added bonus of not having to deal with the sales tax paperwork.

I would assume this is possible since it would be a conventional loan we are talking about.

But “Pulling out equity” is lending industry marketing bullshit for a loan that lets you borrow against potential value. It’s a loan, don’t lose sight of that.

The only way to truly “pull out equity” is to sell

T-Bills trade on a “discount” you buy $100 worth for $95 but get back $100 at maturity, that $5 difference is the interest, you don’t get a separate interest “coupon”. Look at your actual cost basis, I don’t think it’s $5k as that would indeed mean 0% interest which isn’t where rates are these days

It was. Bills are zero coupon. You buy at a discount and then receive the full face upon maturity.

You didn’t pay $5k. You bought it at a discount. T-bills are “zero coupon” meaning they don’t pay an interest payment, instead you buy them for less than face value and get paid face value. The difference between the two numbers equates to the yield you should get.

Edit : so I have a 4mo, it’s face is $20k. I paid $19,694. The price was $98.4712 so the effective yield is 4.76%.

The easiest way is to sell it to a dealer like CarMax. You can be done same day, start to finish. That’s also what’ll get you the least money.

If you want to get as much as possible for it, you’ll need to sell it yourself, which can be a pain, especially since it’s financed and the buyer will likely need a loan. Coordination with both lenders will be required, probably an escrow service too.

it is financed. i guess i’m just trying to figure out what the best options are for getting rid of a financed vehicle that worst case we may be a bit on the wrong side of.

If this is in an IRA, then the Zero funds are great options (I invest in them myself). If this is a taxable account, then you'll want a tax efficient and low cost ETF that is not "substantially identical" to what you hold in IRAs so as to avoid wash sales. Good options are: VTI/VOO, ITOT/IVV and SCHB/SCHX are all good options.

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Did you get a loan for it? I'm not sure what your question is

Lucky for you it’s not in negative equity. If a private sale is too much hassle use one of those online car buying sites? Not sure what ones are local to you, mine is motorway.com. They’re really straightforward

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>as that seems like my best option Will hold long term

Personally, I consider S&P 500 obsolete (in any account where you're not limited to a short list to pick from): why ignore the US extended market and ex-US markets?

Doing S&P 500 only means you take on an uncompensated risk (single country) and ignore a compensated risk (smaller caps). For long term (or even mid-term), I see no reason to do either of those.

>Which has the lowest fee?

Fidelity's FXAIX is the lowest I know at 0.015%. Though I'd consider FSKAX better for the US market: it covers smaller caps as well and is the same cost at 0.015% (then just add FTIHX or similar for ex-US).

>I think fidelity has a zero fee one?

No. Fidelity's Zero funds follow Fidelity designed indexes, so FNILX is 500 large caps and is probably more rules based than S&P 500 is (see the difference in how each handled Tesla in 2020).

Also FXAIX and FNILX (and FSKAX) are index mutual funds, not ETFs.

Edit: Typo

If they all track the same index, they should all be virtually the same. High liquidity/volume and low expenses are best.