Rental Property Investor · Member since 2018 · 9 posts · 2 votes
Hello Bigger Pockets community,
I am in the process (paperwork with my lender) for doing a cash-out refinance of an investment property. I plan on taking cash-out of 75% LTV (Loan to Value). I've been quoted 2.875 for a 3-1 ARM, 3% for a 5-1 ARM, 3.125% for a 7-1 ARM, 3.25% for a 10-1 ARM. In addition, I've been quoted 3.875 % for a 30 year-fixed. About $2800 in closing costs for any of the loans. Doing the numbers, I save about 19,000 over 10 years by doing the 10 year ARM as opposed to a 30 year fixed cash-out refinance and I also pay more of the principle down with the lower interest rate. I save even more with a shorter term ARM on the cost of the money that I take out of the cash-out refi for other investment opportunities.
The more I think about this I am leaning toward a shorter term ARM then refinancing again at a later time. Am I missing something? I appreciate the communities thoughts?
I am in the process (paperwork with my lender) for doing a cash-out refinance of an investment property. I plan on taking cash-out of 75% LTV (Loan to Value). I've been quoted 2.875 for a 3-1 ARM, 3% for a 5-1 ARM, 3.125% for a 7-1 ARM, 3.25% for a 10-1 ARM. In addition, I've been quoted 3.875 % for a 30 year-fixed. About $2800 in closing costs for any of the loans. Doing the numbers, I save about 19,000 over 10 years by doing the 10 year ARM as opposed to a 30 year fixed cash-out refinance and I also pay more of the principle down with the lower interest rate. I save even more with a shorter term ARM on the cost of the money that I take out of the cash-out refi for other investment opportunities.
The more I think about this I am leaning toward a shorter term ARM then refinancing again at a later time. Am I missing something? I appreciate the communities thoughts?
Best,
Joe
Joe, nop, ARMS are great if you know how to use them. Just remember if you don't refinance the rate can be unforgiving as well as prepayments. Do look at the costs and determine how long it takes to recuperate them.
I was considering an ARM loan to purchase an investment property (duplex) but I don't like not knowing what my rate will be in the future. The local Credit Union is only offering ARM loans though at this point for investment properties. Do you think it's realistic to get the financing using the ARM loan and then refinance into a fixed rate 1 or 2 years after (given the current lending practices)?