Posted by James Strange on January 05, 2003 at 22:33:10:
Who knows where loan rates will be 5 years from now. I remember when they went down to 10% everyone was like WOW! It is time to refi while they are low.
On the flip side rates are seam to be very low right now. And I am sure that the Fed knows that raising rates to fast will kill the RE market.
Need advice on a financing question - Posted by Rob PA
Posted by Rob PA on January 05, 2003 at 21:21:41:
I am looking for advice about refinancing rental properties I own. I have 3 properties with 7 units that I currently have financed for 5 year fixed, 15 variable rate at 8%. I have found a lender that will give me 5.25% for 15 years, 5.75% for 20 years and 6% for 30 years. I currently clear $1200 dollars a month at my present rate. I would like to pull $15K to 20K out of this investment and refinance. My current monthly payment is $1238 and a 20 year at 5.75% monthly borrowing 20K more would be $1158. My question is, I could borrow $30,000 at 6% for 30 years and my monthly payment would be $1098 - fixed. I am looking for a higher monthly income but would a 20 year or 30 year loan be better.
Thanks alot
Rob
Re: Need advice on a financing question - Posted by James Strange
Posted by James Strange on January 05, 2003 at 21:38:04:
You will have to decide where your priorities are and your level of risk tolerance.
Let me explain.
Priorities: Do you want to pay off the property or do you want cash flow? If you pay them off then latter they will provide maximum cash flow. Do you need cash flow now or will you need it latter?
Will you use the increased cash flow for more investments or will you just spend it on nice to have items that will decrease in value.
If you want the maximum cash flow now and are willing to take the risk go with an interest only LIBOR ARM. This loan will give you the lowest payment possible. But it will not be paying off the principal. You have to decide what your objective is.
Risk Level: To get a lower rate now you can go with an ARM but will you still be happy with the loan if rates go up? Look at the limits on the ARM and see if you could live with the rate increase.
I am very conservative and I have a good income now. So if I was buying rentals now I would lock in a good rate on a short term loan and pay them off. That would fit well with my situation but your situation may be very different.
James Strange
http://www.liborhomeloans.com
Re: Need advice on a financing question - Posted by Rob PA
Posted by Rob PA on January 05, 2003 at 21:47:49:
Thanks James. I guess monthly income is important to me right now. I have two kids in college and for now real estate is only part time. I was just wondering about the wisdom of locking into a 30 year loan even though the interest rates look good.