Refinancing LTV and year options

3 Replies

I own a few properties and I have decided now was the time to pull some equity to go after more to increase my portfolio. I have never refinanced and at having trouble deciding which LTV and year option I should go with. This property is currently owned free and clear. Thank you for any advice given. If the house appraised at $75,000, we could go up to 80% loan to value for the mortgage, which would be $60,000. If we did that on a 15 year, the rate would be 4.625% and the payment would be $462. If we went up to 75% loan to value, or $56,250, the rate would be 4.375% and the payment would be $426 on a 15 year term. $60,000 on a 30 year term would have a rate of 5.125% and a payment of $326. $56,250 on a 30 year term would have a rate of 4.875% and a payment of $297.

Best option will depend on answering following questions :

1. What are you planning on doing with the cash after refinance ? (Investing and if so what kind of cash on cash return will you generate, future potential, etc )

2. What is your long term investment/portfolio goals ?

3. Your risk/return preference ?  

You choice should be ultimately be driven by what you are planning to do with refinance cash.

@Ketan Patel the goal is to invest in multi family houses. I’m young enough where I have a high risk appetite and still have a day job. I’d like to BRRR the next few properties and give them to a management company. I’d need the cash for cash offers and rehab costs. Rents for a four plex around me are usually in the $500-600/unit range. I hope that helps as I’m still not sure which option fits my goals.

@Nick C. In that scenario you might want to consider borrowing for longer term 30 year and borrowing as much as you can. Yes you will pay little extra interest but it will be worth while in the long term. 

Basically you are making money in real estate by the spread generated by the income in property and capital cost.  Borrowing at 5.125% and using that money to generate more cash flow, appreciation,etc will get the ball rolling for you. Hope that helps!

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