When should we refinance?

[Beth Smart]

Hi. My husband and I have introduced our 20-year-old son to real estate investing. We co-signed on his first investment property that he is going to hack. He bought a distressed single family home and has to do some cosmetic work plus replace windows, roof, and HVAC.  He has to  pay mortgage insurance and that makes his monthly payment too high for him. Once the repairs and updates are done (November), should we immediately refinance or should we wait until the market is better, say in the Spring?  And is refinancing the only way to get rid of mortgage insurance? He's a struggling college student who needs this off his monthly payment.  Thanks for any and all ideas and comments.

[Alexis Sostre]

Hi Beth, love that you’re getting your son started this early — house hacking at 20 is huge.

On your questions: A refinance isn't the only way to ditch mortgage insurance. If he's built up 20% equity (through paydown, appreciation, or the value added from renovations), he can often request PMI removal with the current lender after an appraisal. That saves him from resetting the loan.

Once the reno is done in November, that's a good checkpoint. If the updates boost value enough, he may qualify for PMI removal or a refinance that both lowers the rate and knocks out PMI. Waiting until spring could mean better rates, but he'll be paying extra every month in the meantime.

After the work is done, get a fresh value check. If the equity is there, run the numbers both ways:

• Refi now = immediate monthly relief, possibly higher rate than spring.

• Refi later = maybe better rate, but more months paying PMI and higher payment.

• PMI removal request = best if he can hit that 80% loan-to-value mark without refinancing.

As a lender, I always suggest checking both the payment savings and the break-even point before deciding. Happy to run side-by-side numbers for you guys when November rolls around.