Should I change my current loan?

3 Replies

Two months ago I purchased a duplex on a 20yr 4.5% business loan with a balloon payment due at the end of 5yrs or I refinance at that time. I have the opportunity to move this business loan to a private loan which is a 30yr fixed at 4.375%. Doing this would increase my monthly cash flow approximately $165/mo. Do you think it's worth it to lock in a fixed rate even if it will cost me another $3000-5000 in closing costs?

How long do you plan to hold the property?

If it is a short-term hold (e.g. 3 years) there is no point.  Don't refinance.   If it is a long-term hold, I would definitely consider refinancing.

The key issue isn't as much about cost of refinancing vs cash flow. It is more about the risk you have when the balloon is due. Let's say 4 years from now we have a recession and values drop 20%. Do you want to have to bring a lot of money to the table to meet the LTV requirements on the new financing?

@Greg Scott Thanks for the reply!

I plan to hold the property for quite some time. My biggest worry is what the interest rates might be in 5 years.  Right now where I'm at it's definitely a buyer's market so I think I bought it at a good price ($168,000 and current rents are $2100/mo at that property). 

If you're planning on keeping it, refinance. You're going to have to refinance anyway when the balloon comes due, right?

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