FHA / PMI refi options

3 Replies

Sorry if this post is in the wrong section.

I have a FHA/PMI refi question.

I own a side by side duplex. After 5 years still owe $285k.

Im refinancing to remove the PMI and also to allow me to use FHA again with a 3.5% down payment for next multi family unit purchase.

Currently the mortgage is $2k. Rents are $1600 per side ($3200) a month. $1200 cash flow after mortgage is paid.

Refi options are 30 years @ 4.75% (now considered an investment property) with a new payment of $1900. ($1300 monthly cash flow)

Or 15 years @ 3.99% with a new payment of $2600 month. (Monthly Cash flows $600)

Is it better to have the shorter loan period with less monthly cash flow or the longer term loan but cash flowing more per month and pay that profit onto the principal each year.

I’m 44 and my long term goal is to have at least 5 multi unit properties paid for and cash flowing by the age of 60.

Looking for a strategy.

Thanks

@Ben Cochran

Hi Ben, I'm not an expert on the topic but I'm considering going the FHA route for a duplex myself.

My thought would be to keep the cash flow higher, while giving yourself the option of paying extra towards the mortgage.

In other words, a slightly higher interest rate is OK given the cash flow difference, but you could also take the extra cash and apply it towards the mortgage if you really wanted to. The shorter mortgage means the cash flow is very tight and any vacancy would mean you are paying out of pocket.

Just my perspective as I'm about to head down this path as well. Would be very interested in reading what others think about it.

Good luck!

@Ben Cochran That's awesome you have a duplex! I myself also am looking for a duplex along with SFR right now. Does $2600 mortgage payment include other expenses as well? Such as repair, CapEx, Maintenance, Management etc? I usually hear people putting around 5% for everything except Management, which depends on the area and the company you use (will use in the future) but around 10%, so total of around 25% of your rents $3200, which is around $800 should be kept outside of your cash flow? These are just rough numbers so please don't rely on this, but you get the gist. But it looks like you might be negatively cash flowing with 15 year mortgage! Correct me if I am wrong :)

With that said, I also think going 30 years amortization sounds better!:)

Cheers