Cashout refi Chicago conventional vs fha pmi

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Cashout refi Chicago conventional vs fha pmi

Aaron Frances
Chicago, IL · Member since 2016 · 61 posts · 11 votes
Im looking to do my first cashout refi in Chicago and was quoted a 4.8% on 30yr or a 4.1% fha on 30yr. I owe 192k and arv we are guessing is 350k so all I want is 60k to pull out. That gives me a new mortgage if around 260k he mentioned throwing closing cost into the loan. Fiference of two mortgages was $1933 or $1988 for the fha loan. I'm curious which loan APR I should choose 4.8% conventional or the 4.1 FHA? Sucks paying mortgage insurance but the 4.1% looks so much sweeter. I'm looking to make $3150 in rent. I asked a newbie question and said wouldn't the FHA pmi fall off once I pay 20% of mortgage off and he told me that it would stay for the entire life of loan. I'm not sure how true that is, any input would be greatly appreciated.
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Brie SchmidtBusiness Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
9y

@Aaron Frances - I would not do the FHA - The PMI does not drop off and you would have to refi again to get it off. If the ARV is $350k and you want $260k I don't understand why you would have PMI, it is less than a 80% LTV. Another option is a HELOC that would let you pull out $60k and keep your low interest rate on the main loan. My HELOC with @Michael Barbari is $100k interest only for 10 years and my monthly payment is $350 so my guess is your payment would be around $210

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  • Aaron Frances
    OP
    Chicago, IL · Member since 2016 · 61 posts · 11 votes
    9y
    By the way I'm leaving a 3.44% behind to do the cashout.
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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    9y

    @Aaron Frances - I would not do the FHA - The PMI does not drop off and you would have to refi again to get it off. If the ARV is $350k and you want $260k I don't understand why you would have PMI, it is less than a 80% LTV. Another option is a HELOC that would let you pull out $60k and keep your low interest rate on the main loan. My HELOC with @Michael Barbari is $100k interest only for 10 years and my monthly payment is $350 so my guess is your payment would be around $210

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  • Aaron Frances
    OP
    Chicago, IL · Member since 2016 · 61 posts · 11 votes
    9y

    I went through NHS Neighborhood Housing Services to buy my 2 flat. The loan is with Dovenmuehl finance. When I got the loan they indicated that I could not borrow against the home for the life of the loan since they are a non for profit agency that's sole purpose is to keep people in their homes without the possibility of them screwing it up by doing a cashout or heloc. I figured my only way out of this was to refi and go with a different bank.  

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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    9y

    @Aaron Frances, you're looking to make $3150/m in rent, as well as live there? That's a good trick.

    With your current VERY low interest fixed loan, I'd agree with @Brie Schmidt - go with a HELOC.

    You're only going to invest in things that generate a much HIGHER return than its loan cost, right?

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  • Aaron Frances
    OP
    Chicago, IL · Member since 2016 · 61 posts · 11 votes
    9y

    Yes, $3150 is gross, my Net will be $1135 after I figured in the new mortgage amount, I can even make an extra $250 if I rent out the garage. My plan was to use the loan to renovate the Basement. NHS has rehab loans but they are super strict on the process of of how they manage the disbursements of the money. It was a pain to buy the 2 flat to begin with. So I figured the Refi through another bank was the best option so I would not have to hire a GC. NHS requires that I go with contractors that can start the job with No money down, sounded odd but they required it. They held my money for 3 months until I got the Lead paint scraped off the front porch/columns and stairs. I was also required to replace the two circuit breaker boxes and bring them up to code. I had to pay the contractors out of pocket and get reimbursed from them once they inspected the work.   

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  • Michael Facchini
    Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
    9y

    FHA is likely not the best option long-term, and it is true PMI does not fall off in most cases. If you're looking to use the funds for rehab/improvements, then you should definitely look at a renovation loan, namely the Homestyle program.

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  • Aaron Frances
    OP
    Chicago, IL · Member since 2016 · 61 posts · 11 votes
    9y
    Follow up question. Are these heloc and home Reno loans available to me through the refinancing with the new bank or are you assuming my current bank will give me these offers. I'm still determined to get out of the current loan with NHS due to the stringent policies.
    0Reply
  • Alex Bok
    Real Estate Agent · Chicago, IL · Member since 2016 · 283 posts · 71 votes
    9y

    With your interest rate I'd do a heloc

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