should i refinance my investment property - Posted by Jason

Posted by Chris on August 14, 2010 at 21:04:10:

Guys, NOO is the key word. Unless the OP moves into the $ 152 k home in order to refi, I see no chance of him getting that lovely sub 5% rate. And with hard money, I was offered ~ 10% for a few years with ~ 5-6% loan generation cost. So I’m lusting after that 7% NOO loan terms! Since you have a history with the lender, try to extend the loan and better start n o w as these things take terribly long sometimes.

it’s more a question of what you CAN do versus what you WANT to do.

Buy a programmed HP business calculator to see how great an impact an extra repayment of a few thousand Dollars will have at the end of the mortgage. See how the loan changes from mostly interest to mostly repayment etc. Compare mortgages in seconds, points or no points. Good luck!

should i refinance my investment property - Posted by Jason

Posted by Jason on July 18, 2010 at 21:37:54:

With interest rates so low, should I refinance my investment properties. I have 3 properties. the first 2 are condo’s and have 7% interest rate with about 15 years remaining. The first one is valued @ 115K and has 68K left on the mortgage. The second one is worth 56K and has about 42K left. The third one is a house and has a 4.875% 8 yr balloon that runs out in Nov 2011. It is worth 225K and has 152K left on the mortgage. On the condo’s I make between $50 - $100 pos cash flow. The house I currently make $295 pos cash flow. I have excellent credit and can get the best rates but the points are higher. Is it better to refinance to the lower rate? The cost to refinance will reduce the equity in the properties and the breakeven point will be years away. If yes, should i just refinance to reduce the payments or is it better to do a cash out refinance and have the money for other investment opportunities?

Re: should i refinance my investment property - Posted by Jason

Posted by Jason on September 06, 2010 at 16:07:27:

Thanks for the comments. I think I have decided to leave the condo’s alone and just refinance the house. With rates so low, I can lock in @ under 5% and not have to worry about the rates next year when the loan expires. The bank will not work with me (NFCU) because they dont deal with investment properties. It was my primary residence when I bought it.

Re: should i refinance my investment property - Posted by Nate-WI

Posted by Nate-WI on August 08, 2010 at 14:00:42:

Hi Jason,

I’m not a fan of refinancing. As you have said yourself…your break even point will be years away. Paying closing costs, lender fees, more junk fees, will all add up. You will have to re-fi the one that expires in Nov. 2011 unless you can pay it off which would be fantastic. You are in a very good spot. I would continue to pay these down until they are paid off and free and clear.

At that point you could re-fi into a heloc or 2nd mortgage and use those lines to buy more rentals, flips, etc. The rate of 7% is fine. The best? No but its fine. I would not do a cash out. I would pay them off and then do the above.

Nate-WI

Re: should i refinance my investment property - Posted by Craig Grella

Posted by Craig Grella on August 05, 2010 at 12:18:52:

You need to do a quick analysis. I suggest using a spreadsheet like excel to figure out what the cost will be to refinance those loans vs. the amount of money it could save you. Once you have the quotes/estimates run the numbers and see if it saves you money. If you’re the type of person that likes to refi every couple of years, then your savings horizon should only go out five years or so. That means you’d really have to be saving money on rate/payments to make up the hit you’ll take in the refi costs. If your plan is to hold long term, then it might make sense, since rates can’t really get any lower than they are now.
hope that helps. contact me if you need help on figuring out how to do that calculations.

Re: should i refinance my investment property - Posted by christopher w

Posted by christopher w on August 04, 2010 at 10:09:37:

I would suggest refinancing the house with the 152K balance left. You are well under the 80% LTV limit for MI and with rates at all time lows you may be able to lock in that 4.875% for 30 years.

Re: should i refinance my investment property - Posted by Nate-WI

Posted by Nate-WI on August 07, 2010 at 23:54:57:

Um no you shouldn’t go a darn thing. Equity is so disillusion. How about you keep the rates at 7% (which is solid by the way) and you just keep plugging away. Private money is where this industry is at…

Nate-WI

Re: should i refinance my investment property - Posted by Christopher w

Posted by Christopher w on August 08, 2010 at 11:03:14:

Nate

7% is “solid”??? The OP can drop is rate by over 2% and your
advising him to sit on the sidelines and not take advantage? That is
terrible advice. Not taking the drop in payment into account he
would stil be able to pay an additional $125 in principle on his
balance every month.

Re: should i refinance my investment property - Posted by Nate-WI

Posted by Nate-WI on August 08, 2010 at 11:05:13:

7% for NOO is solid and its not terrible advice to keep it. You, as a mortgage broker, should know better.

Re: should i refinance my investment property - Posted by christopher w

Posted by christopher w on August 08, 2010 at 13:20:38:

Nate,

7% may have been solid a few years ago, but not now. As a mortgage professional I can tell you that 4.875% is tremendously better than 7%. Your giving horrendous advice with nothing backing it up other than “7% is solid”. If you have nothing else to back up your statement perhaps you should leave the mortgage advice to the professionals.