Best use of capital, 10% or 20% + co refi
Getting ready to lock in loan terms on a new large STR in the Smoky Mountains. Property is a new construction 10B/10ba property.Trying to play out two different scenarios to see what would be the best use of capital in the mid-term (roughly five years).
Option 1: 10% down, 4.375%, paying 2 points equaling $30K, P+I roughly $7525 + PMI of roughly 785 = $ 8310
Option 2 20% down, 3.875%, paying a quarter point equaling $3700, P+I roughly $6301
Option 1 would keep a significant amount more in our pockets (more than $125K) and get us very close to picking up another property and the difference in of 2K in cashflow would take nearly 7 years to balance out
Option 2 would be over $300K out of pocket but would potentially give us the option of a very quick cash out refi as there is already a significant amount of equity as we went under contract last July and obvious market conditions. If we cash out refi, that would also have fairly significant closing costs that would negate much of the initial 30K we paid in points on option 1.
I am seeing strong pros and cons for both scenarios and would love thoughts on what might be the optimal use of capital in this scenario. Thanks!