Posted by RJ Baxter on November 01, 2005 at 08:32:24:
You can probably get lower, depending on your credit profile and other particulars. Is this loan a straight 100% loan or is the 1st an 80% 1st and do you have a 20% 2nd? If it is a straight 100%, you are not doing bad on the rate.
If an 80/20, you should have been advised to use points to get a lower rate if you intend to hold the property for the long term- with 2 points, for example, you should be in the mid- 6’s. So, the argument goes, over time you will be ahead through saving money with lower payments. Another thing about points is that they are tax deductable the year you purchase the home (if used at purchase), but unfortunately, they must be amortized over the term of the loan in a refinance- so you can only write off 1/30th of the cost of the points each year for 30 years.
Disclaimer: I am not a CPA and this is not tax advice!
Posted by Jay B. on November 01, 2005 at 06:00:16:
I’ve been wanting to get a couple “buy & hold” single family homes. I just bought the first for a reasonable price. The 30 yr, fixed I got was at 7.75% with no down.
Is that rate too high or should I of put something down to lower the payment? I’ll be cutting it close on the cashflow end and now unsure if I made a wise decision.
I had shopped around with many lenders.
How should one finance a long term house in this market? How do you assure some cashflow or can you?
Does anyone get a higher rent using a “rent to own” plan instead of straight rent?
Any related feedback is appreciated!
Re: rental financing - how to - Posted by Ben Carmona
Posted by Ben Carmona on November 02, 2005 at 10:10:33:
Cash flow can definitely be a problem with 100% financing. Many of my clients buy properties at below 70% of the market value. Either distressed sales or rehabs. They then do cash out refinances but mostly never go past 90%. Payment would be to high for a rental.
Without knowing other important details it would be hard to pinpoint if your terms were good.
The majority of my clients with scores over 660 who finance at 100% on a sales price of around $150,000 would see a first mortgage rate of arond 6.875 paying 1% origination with no discount points. No prepays either. There would be a small 2nd with higher rate but definitely worth it to avoid pmi.