FHA / PMI refi options

[Ben Cochran]

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

[George Gabriel]

@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!