Streamline Refinance or Downpayment for Investor Property
Hello BP Forum,
My husband and I are new homeowners and new Investors as well. We purchased our first home a year ago but didn't have the 20% down payment because we wanted to pay off my student loan immediately among other things and are currently paying mortgage insurance (PMI) as a result.
We would like to make our first investor purchase this year but I wanted to know what is best. Should we do a Streamline Refinance on our home since the interest rate is much lower that the 4.125 fixed rate we initially took, take the $15,000 equity from our home and put it towards the 20% down payment to get rid of the PMI and have a lesser monthly payment or use that $15,000 towards the purchase of our first investor property? I was thinking to refinance anyway and leave the $15,000 equity as a down payment for the investor property but would love to hear your suggestions!
Anything you can invest today, will make your future self very happy. PMI is only 1% of loan, you will make much more on an investment property if you buy smart. Plus in 15 to 30 years when the loans are paid off you'll own two house free and clear, I would jumpstart that ASAP.
What is your home worth ? and what do you currently own ?
That information will help to answer your question as to which way best for you.
@ Kristopher Raepple, Thank you that's what I was thinking!
@Tommy Oan, The house appraised for 134,000 and we currently owe 119,000
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An FHA cash out refinance is going to be maxed at 85% LTV (loan to value) and for a conventional loan it's going to be 80% so cash out is out of the question.
Now if you do an FHA streamline then you should be able to save a decent amount as your MI will go down by .5% and streamline rates are around 3.5%. So if you have a 620 fico or better you can move forward with no appraisal or income verification since they use the FHA connection to get the value and income was already documented.
For an investment home you’re looking at 15 - 25% down depending on what the type of property is.
I hope this all helps and have a great weekend.
@Yolanda Estrada I was a little confused at to where the $15k was coming from until I read Shaun's post above. I agree with him. I doubt that you're going to find any lender in today's environment that'll do a 100% cash out refi. The only way you'll see that $15k is if you sold the property in which case it'll be less than $15k since you'll have to pay commissions and closing costs.
Do the Streamline Refi and start saving for that investment property separately. Good luck!
Thank you for the loan comparisons yes that was very helpful. My fico score is higher than that so I should get a pretty good rate. You enjoy your weekend as well!
@ Andreas Mirza
Oh, ok I see. Thank you for the advice. I've already started. :)