So, the question is should I refi or just take out a loan to get the money to start our next rehab property.
Basically, I owe $27k with 5.9% on my current mortgage. I have gotten a quote for a refi with an interest rate of 4.7% and 75% LTV. If my appraisal is estimated at $85k, then I could walk out of the deal with $30k. This would bring my monthly payment up some and decrease my cash flow from $350 to $175. Is this a good plan to go through with? Is 4.7% a good interest rate? Should a potentially consider taking out a traditional loan to get the money for my next rehab budget? Should I be this worried about decreasing my cash flow?
Any advise is greatly appreciated!!!!
@Sean Tippens the way to evaluate is what will you do with the borrowed money? Will it bring you a better return than you are now getting. Will it bring you a better return that your cost to borrow.
Then you have to consider the risk. The more you borrow the greater your risk. A key indicator is the amount of cash flow vs your payments (Debt Service Coverage Ratio or DSCR) The higher your investment income relative to your financing cost the safer.