Which refinance strategy should I choose ?

Question

Purchased property in 2018 Q2, $50k downpayment; $200k loan; price was $249k

Right now I have 30 years fixed, 4.375% ARP ; $1533 / month as payment (p&i + tax incl) ; 225 HOA / m

Option 1: 30 years, 2.8% ARP; $1340 / month (p&i + tax incl) as estimated payment

Option 2: 30 years, $30k down, 2.8% ARP; $1240 / month (p&i + tax incl) as estimated payment

Option 3: 15 years ; 2.5% ; $1840 / month (p&i + tax incl) as estimated payment

Option 4: 15 years ; $30k down ; $1600 / month (p&i + tax incl) estimated payment

Unit is being rented as of now for $1650 / m until 2021 July.

I am not sure I can rent it out for more than $1700 / month. I would like to have unit to pay for herself over the years, without the need to put $100-$200 there in every month to match mortgage amount.

I am in favor to put $30k down for 15 years, so I can have this as a savings for college to my son. Is it a bad idea to increase equity with refinancing? I never heard that people do it, it's usually the other way around.

Any advice is highly appreciated.

David M. · Answer

@Karoly Holczhauser

You can do whatever you want.  It depends on your goals and strategy.

I’d say with one of the 30yr.  The rates aren’t that different at all with the 15yr.  Not running any numbers, you are dropping your rate about 1.5% so you should make back your refi cost in 2-3 years.  That’s good as it justifies the cost of refi.

Do 30yr because you can always pay it off as a 15yr (to meet your goal of saving for your son).  If you ever get into a rough patch, at least you can pull back and just make the 30yr payment.  For example, tenant gives your notice that they are moving out.  I’d switch back to the 30yr payment schedule since I’m not sure when the next renter will start.  Then once you find a tenant and depending on the rent, you can increase your payments again.  Maybe in 5 years rents go up.  You put that additinal rent towards the mortgage principal if you want and pay down the loan even faster!

Karoly Holczhauser · Answer

@Ethel Alimbuyao

NjLenders, I can refer you, if you wish

Ethel Alimbuyao · Answer

@Karoly Holczhauser, may I know which bank/lender offers these great rates? Thanks.