Should I get a personal loan to pay on my mortgage to go “above water” to qualify for a refinance?
It depends on how long it will take you to pay off the personal loan, the rate for the personal loan, the refi rate you think you can get, how much principal you will have to add to get the refi (may have gone up since then). Since you did not provide all the necessary details, the general answer is to sketch out your total payments (mortgage + personal loan) with and without the refi over the life of the mortgage and see if you end up with more money in your pocket with the refi. My overall impression based on the details you did provide is that you will probably find it worthwhile to do the refi. Let's say you owe $200K (since you didn't mention balance. If you do, I'd edit my response), and can get 4.5%. You'd save 1.5% or about $3K/yr the first few years. If a $12K paydown is all that's between you and and refi I'd figure out a way.  There are banks that are offering refi's under the HARP program if your current mortgage is owned by FNMA or FMAC which permit even if under water. So, the first step is research to see if you can refi exactly what's owed, failing that, shop around. A 401(k) loan will not appear as a loan on your credit report, that may be one way to raise the $12K. The best thing you can do is put all the savings into the 401(k) to really get it going. If you have a mortgage backed by FHA, Fannie, or Freddie I would hold off.  There is talk of a new plan that would allow refi's on mortages that were underwater.  I would expect rates to stay about the same for the forseeable future.  Take that money you would spend each month on the personal loan and stick it into your mortgage payment to bring down your debt on it.  Your home may be underwater on paper but once the economy comes back, or hyperinflation sets in (one of the 2 will happen) you will have equity in your home again soon after. Does it cost money to refi? I know there are quite a few deals out there, I refi'd in June for $500, not bad. But sometimes can cost couple grand. If so, you have up front costs, plus the cost of the personal loan, that probably would break even at some point after your refi, but at what point? Will you sell before then, or even think about it? Or would you break even next year, then its a no brainer. As mentioned by others, do the numbers.
I would not take this personal loan. Let's look closer at your options. Currently, you are paying $1100 a month in rent, and you have all the money saved up that you need to be able to pay cash for school.  That's a good position to be in. You are proposing to take out a loan and buy an apartment.  Between your new mortgage and your new personal loan payment, you'll be paying $1500 a month, and that is before you pay for the extra expenses involved in owning, such as property taxes, insurance, etc.  Yes, you'll be gaining some equity in an apartment, but in the short term over the next two years, you'll be spending more money, and in the first two years of a 30 year mortgage, almost all of your payment is interest anyway.  In two years from now, you'll have a master's degree and hopefully be able to make more income.  Will you want to get a new job?  Will you be moving to a new city?  Maybe, maybe not.  By refraining from purchasing the apartment now, you are able to save up more cash over the next two years and you won't have an apartment tying you down.  With the money you save by not taking the personal loan, you'll have enough cash for a down payment for an apartment wherever your new master's degree takes you. Check your mortgage paper work. Most mortgages have clauses requiring you to maintain the property, keep it in good repair, and to prevent spoilage. The property is the mortgagee's security for the loan, so it's reasonable that they have a voice in keeping the property in good shape. You can tell them to pound sand, and then they can call the loan due in full. I think you are running into multiple problems here: All these together look like a high risk to a bank, especially right now with companies being reluctant to hire full-time employees. Looking at it from their perspective, the last thing they need right now is another potential foreclosure on their books. BTW, if it is a consolation, I had to prove 2 years of continuous employment (used to be a freelancer) before the local credit union would consider giving me a mortgage. We missed out on a couple of good deals because of that, too. It may be possible to get more cash than you currently have. For example, If you have $200,000, you could buy a distressed property for $150,000, spend $50,000 on renovations, get it appraised for $300,000 and then cash out refi $240,000 (keeping 20% equity to avoid MIPs) to invest. This would be analogous to flipping a house for yourself. Normally flippers buy a house for cheap, then sell it to someone else for way more than their total outlay in purchase + improvements. The only difference here is there's no 3rd party - you stay in the house and essentially buy it from yourself with the mortgage. Questions regarding loans, refinancing, mortgages, credit cards, investing and anything else that may be related to personal finance should be directed towards the subreddit r/personalfinance. We have provided the link to that subreddit below.   [----&gt;  Over there on the sidebar.](http://www.reddit.com/r/personalfinance/) Jus' say'in. First, check with your lender to see if the terms of the loan allow early payoff.  If you are able to payoff early without penalty, with the numbers you are posting, I would hesitate to refinance. This is simply because if you actually do pay 5k/month on this loan you will have it paid off so quickly that refinancing will probably not save you much money. Back-of-the-napkin math at 5k/month has you paying 60k pounds a year, which will payoff in about 5 years.  Even if you can afford 5k/month, I would recommend not paying extra on this debt ahead of other high-interest debt or saving in a tax-advantaged retirement account. If these other things are being taken care of, and you have liquid assets (cash) for emergencies, I would recommend paying off the mortgage without refinancing. "I am lucky enough to have chosen a flexible mortgage that allows me to change payment amounts at certain, very lenient intervals (to a minimum amount).  So when I was laid off, the first thing I did was call my bank to lower my payments to a level that allowed me some breathing room, at my new, lower income.  If and when my family's income increases, I'll re-adjust my payments to a higher amount.   But if you're concerned about the ""what if""s in this economy, I'd definitely choose a mortgage that allows for flexibility so that you don't lose your house if you don't have to, particularly if your situation is temporary." If you intend to flip this property, you might consider either a construction loan or private money. A construction loan allows you to borrow from a bank against the value of the finished house a little at a time. As each stage of the construction/repairs are completed, the bank releases more funds to you. Interest accrues during the construction, but no payments need to be made until the construction/repairs are complete.  Private money works in a similar manner, but the full amount can be released to you at once so you can get the repairs done more quickly. The interest rate will be higher. If you are flipping, then this higher interest rate is simply a cost of doing business. Since it's a private loan, you ca structure the deal any way you want. Perhaps accruing interest until the property is sold and then paying it back as a single balloon payment on sale of the property. To find private money, contact a mortgage broker and tell them what you have in mind.  If you're intending to keep the property for yourself, private money is still an option. Once the repairs are complete, have the bank reassess the property value and refinance based on the new amount. Pay back the private loan with equity pulled from the house and all the shiny new repairs. The PMI rate is calculated at the time your mortgage is underwritten to be terminated at the point where you have 20% equity in your home.  It is calculated based off of default risks based on your current equity value at the time of the loan.  So if you got your mortgage before the banking crisis those risk charts have changed dramatically and not in your favor. So lets say you have a 100k home which you put 10k down so you have a mortgage of 90k.  Since you have accumulated an additional 5k equity so payoff value is now 85k.  If you refinance your mortgage and the home values in your area have dropped 15% you now are borrowing 100% of the value of your home.  So you have higher risk from being at 100% as opposed to 90%.  And the PMI is for the 20% of equity you do not have that the bank can not expect to recover.  So when you originally bought the house your PMI pay out was 10k.  At 85K value and 100% borrowed the PMI payout will be closer to 18k.  While you may still be able to sell your home for the original value when they do the refinance calculations they use what your area has trended.  If that is the case you maybe be able get an actual appraisal to use but that will come out of your pocket. *Disclaimer: These are simplifications of how the whole complex process works if you call the banker they can explain exactly why, show you the numbers, and help you understand your specific circumstances.  * First step, pull a copy of your credit report, and score. You should monitor that score and do what you can to bring it up. Your chances are far better if (a) you first save a sizable downpayment, and (b) go with a local bank that doesn't just write the mortgage and sell it. Better still, go to that local bank and inquire about REO (real estate owned by the bank) property. These are properties they foreclosed on and depending how they are carrying them, you might find decent opportunities. As a matter of logic, a local bank that owns these specific properties (as compared to debt pools where big banks have piles of paper owned fractionally) are more willing to get a new owner in and paying a new loan.  Congrats on the new, higher, income. I'd suggest you first build the emergency fund before the downpayment fund. Let us know how it goes. I'm not sure about your first two options.  But given your situation, a variant of option three seems possible.   That way you don't have to throw away your appraisal, although it's possible that you'll need to get some kind of addendum related to the repairs.   You also don't have your liquid money tied up long term.  You just need to float it for a month or two while the repairs are being done.  The bank should be able to preapprove you for the loan.   Note that you might be better off without the loan.  You'll have to pay interest on the loan and there's extra red tape.   I'd just prefer not to tie up so much money in this property.   I don't understand this.  With a loan, you are even more tied up.  Anything you do, you have to work with the bank.  Sure, you have $80k more cash available with the loan, but it doesn't sound like you need it.  With the loan, the bank makes the profit.  If you buy in cash, you lose your interest from the cash, but you save paying the interest on the loan.  In general, the interest rate on the loan will be higher than the return on the cash equivalent.   A fourth option would be to pay the $15k up front as earnest money.  The seller does the repairs through your chosen contractor.  You pay the remaining $12.5k for the downpayment and buy the house with the loan.  This is a more complicated purchase contract though, so cash might be a better option.   You can easily evaluate the difficulty of the second option.  Call a different bank and ask.  If you explain the situation, they'll let you know if they can use the existing appraisal or not.  Also consider asking the appraiser if there are specific banks that will accept the appraisal.  That might be quicker than randomly choosing banks.   It may be that your current bank just isn't used to investment properties.  Requiring the previous owner to do repairs prior to sale is very common in residential properties.  It sounds like the loan officer is trying to use the rules for residential for your investment purchase.  A different bank may be more inclined to work with you for your actual purchase. Keep in mind that if you choose a loan for the boat, you may be required by the lender to maintain a minimum coverage of insurance during the term of the loan. Further, some states require you to carry some level of liability insurance on your boat, and some entities require liability insurance when using certain bodies of water within their jurisdiction. If neither apply to you, and if you could suffer the loss of the boat itself, could you similarly suffer the damages caused by your boat if you lose control?  Let's say you hit a much larger, more expensive boat, or your boat breaks free from it's dock and damages the dock well beyond the cost of your boat. Are you also able to withstand these costs? If not, you may want to invest in minimum liability insurance. If, at this point, you are still convinced that you are not at financial risk due to the boat, I'd strongly suggest a plan of self insurance.  Take the money you would normally spend on insurance, and invest it in low risk investments that can be liquidated in a matter of months.  If you do have a problem with the boat, your risk is mitigated by the self-insurance.  If you don't, then you have not only saved that money, but increased its value. Your wealth will go up if your effective rate after taxes is less than the inflation rate.  That is, if your interest rate is R and marginal tax rate is T, then you need R*(1-T) to be less than inflation to make a loan worth it.  Lately inflation has been bouncing around between 1% and 1.8%.  Let's assume a 25% tax rate.  Is your interest rate lower than between 1.3% and 2.4%?  If not, don't take out a loan. Another thing to consider: when you take out a loan you have to do a ton of extra stuff to make the lender happy (inspections, appraisals, origination charges, etc.).  These really add up and are part of the closing costs as well as the time/trouble of buying a house.  I recently bought my house using 100% cash.  It was 2 weeks between when I agreed to a price to when the deal was sealed and my realtor said I probably saved about $10,000 in closing costs.  I think she was exaggerating, but it was a lot of time and money I saved.  My final closing costs were only a few hundred, not thousands, of dollars. TL;DR: Loans are for suckers. Avoid if possible. Yes. You can request for additional loan and it would be given as cash. You are free to do whatever you like with it. This does not mean Bank will automatically grant you loan. They would ask you purpose, check your ability to make additional repayments, verify if the property has actually appreciated before deciding. Note this is not savings. This makes sense only if you can generate returns greater than the cost of loan. what are my options for raising the funds? Assuming you have decent credit, you can either mortgage your home or apply for a land loan in order to purchase the land. Since both your home and the land have value, either one can act as collateral in case you default on your loan. Land loans tend to have a higher interest rate and down payment, however. This is because banks see land loans as a riskier investment since it's easier for you to walk away from an empty plot of land than your own home.