New Goals, Rental refinance - cash out and lower payment?
New Goals, Rental refinance - cash out / lower IO payment or Repayment?
Hi BiggerPocket investors! I wanted to get some advice / options. I am looking to refinance a SFH I have rented out in UK and use the money to invest in a multi unit in the US. I bought the SFH in 2003 and lived in it for a time. I moved abroad in 2012 and was overpaying the mortgage to clear. Current situation:
Value: $500K
Mortgage: $56K
Rent: $1685
Mortgage: $1450
Term left: Just under 4 years
My goals have changed, I am looking to build my real estate portfolio in the US. Long term to replace my job and provide in my retirement. I am 38 so have some time to do this. I currently have a two family in Washington DC and am looking at four unit buildings.
Buying more property in the UK is unrealistic, with property sales tax and tax circa 20%.
I have a few quotes to refinance to $200K (Although most will let me go to $350K) and take about $140-150K out from the property. I would still have 60% equity in the property. Refinancing options (not the best as I am not a resident):
All 25 year options
Lender 1 - $1350 refinance costs.
1 Fixed 5yr, 4.49%, $1129 repayment.
2 Fixed 5yr, 4.49%, $760 interest only.
Lender 2 - (I haven't had hard figures across) Between $3000-4000 refinance costs.
1 Fixed 5yr, 3.97%, $857 repayment.
2 Fixed 5yr, 3.97%, $580 repayment.
Some back ground, I am married. We are both employed and have good money reserves. We also have no housing costs for the next 5 years.
At the moment I am leaning towards Lender 1, I don't like the heavy costs for Lender 2, plus with it being a 5 year fixed (not many longer options in the UK), I will have to refinance in 5 years.
Is refinancing a good idea? Am I being too conservative (my natural state) with the refinance amount? What refinance option makes the most sense? Should I be leaning towards interest or repayment.
I have known the property in the UK wasn't being utilized for some time, but couldn't find a solution, till I got on BiggerPockets. Its been a real mindset shift. Would love to hear what you all have to say about this!