Are these loan terms favorable?

Question

I have a sfh that rents for $650 per month. Current loan balance is $19,000. Current rate is 5.75. Property value is around $65,000-$70,000. I want to refinance and pull some money out to use for down payments on more units.

I have talked to one local bank and they offered 3/1 ARM at 4.83% and a 5/1 ARM at 5.08% max term of 15 years. I plan to talk to more banks to compare.

I have never refinanced a property before, so I am wondering what people think of these terms in the current market.

All advice, suggestions, comments, etc. are welcome. Thanks in advance.

Bruce Clark · Answer

Account Closed I agree on the 15 year term. That is what is hanging me up too, because although my current rate is 5.75, it is also fixed for 30 years, which gives me some piece of mind. I would much rather get a LOC on the property, so that I could just pay the money back when I wanted and the term wouldn't matter.  I havent found a bank yet that will give me a LOC secured by an investment property. I am still looking though.

Thanks for the input.

Joshua Fulenwider · Answer

Bruce,

I've only every seen 1 LOC on an investment property and it was special circumstances and the borrowers had a lot of other loans and deposits with the bank.  It's not unheard of, but it is pretty rare.

I do make commercial lines of credit secured against equipment and vehicles quite regularly but we like to see them paid to zero and rest for a few days at least once per year.  They do also require annual renewals.

Joshua Fulenwider · Answer

Not sure about Ohio.  Where I am the rates seem very favorable on investment properties.  However, the 15 year term could spoil the deal.  It may be in your best interest to pay a higher rate elsewhere in order to get a longer term loan and achieve lower monthly payments.