Refi half way through loan??

Question

Hi Fellow BP members. I’ve got a couple questions regarding my multi-family property in CA. I have roughly 13-14 years left on my original loan and with todays interests rates and dramatic property value increase I am thinking about refinancing and taking some cash out. Question is do I do a 15, 20 or 30 year loan and what makes the most sense. Wife wants to pay it off so we are free and clear for cash flow income, which comes with a 100k plus increased monthly payment over what we currently have or is it a better option to take a 30 year loan at lower interest and lower payment than we currently have. It’s about a 1200-1500 monthly difference between cash flow and new payment. We ultimately will be living off the income the property generates down the road. Need some advice and the pros and cons of paying off the property or extending the loan. Any input or shared experience would be helpful.

Thank you

Darian Sanayei · Answer

@Chad Reynoso everyone’s goals are different. Don’t leverage yourself too much, but I would suggest cash out refi 30 year loan.

Use the cash to buy more and produce more cash!

Chad Reynoso · Answer

I will give it a go and see how challenging it is.  I’d like to keep both my CA properties for the appreciation as time goes on until I can’t keep up.

Timothy Hero · Answer

Depends on your goals.

Assume you have a property generating $1k/month cash flow. You can cash-out the equity and the cash flow reduce to $750/month, but you use the proceeds to buy a second property that does another $750/month.

More cash flow this way and you don't have all your eggs in one basket.

Jaron Walling · Answer

@Chad Reynoso Depends on your age and investment goals as a whole. If you plan to expand the portfolio and buy more properties I'd cash-out and leverage more. Rates are expected to increase this year and Feds keep bringing it up. If you plan to retire and don't want to expand pay it off ASAP and bank the extra cash-flow. The 15 year mortgage is really close the remaining 14 years. Having free and clear investment properties during retirement is a major milestone. I don't know your age but you're 55-60 years I'd be focused on locking down properties, selling duds, and getting debt free.

Stability > risk at the that age but hey what do I know. I'm only 35 and leverage everything. Cheers

Stability > risk at the that age but hey what do I know. I'm only 35 and leverage everything. Cheers

Chad Reynoso · Answer

I’m 42 and plan to move out of California.  Planning to buy an out of state house to rent before we make the move. In order to that I will certainly need some cash out so therefore which term loan makes the most sense? 15 or 20yr at a higher rate and payment or a lower interest and lower payment 30yr. In your opinion?

Jaron Walling · Answer

@Chad Reynoso You'll get a lower interest rate with a 15 yr mortgage, guaranteed. I think you said that backwards. Or I'm confused. Sounds like a good position to be in either way. Like mentioned it's timeline specific; either way I'm pulling some cash for the next opportunity.

Do you want to be an OOS investor when you move? It's a headache if you don't use a PM company or have boots on the ground fixing things.

Chad Reynoso · Answer

Uncertain at this time but maybe 5-10 years and I plan on keeping the rental property and my single family when we move.

Matt Devincenzo · Answer

@Chad Reynoso when are you thinking of moving, and when you do are you planning to keep holding this property? This timeframe is likely part of the decision process.

I'd go for a 30 yf loan since it will keep your payment lower and options open. You can always pay it off like it is a 15 if you choose to, but your DTI etc will be better showing the 30.

Refi half way through loan??

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