Cash-out refinance interest rates too high!

31 Replies

I need some help.

I am getting ready to cash out refinance a property I bought all cash back in June 2017 in Springfield, Massachusetts.

I got couple of quotes. All of them are in the low 5 to mid 5's with couple of thousand closing costs @75% LTV which is pretty high in my book!

I have perfect credit and no debt.

I am surprised that non-owner occupant, 3 family is penalized so much over an owner occupant.

If anything, I am more capable of paying the mortgages better than an owner occupant because the property produces more than 3.5 times the mortgage payment. It is professionally managed.

Does anyone know credit unions or banks that are more investor friendly and who can make logical risk assessments? Preferably 80-85% LTV with low 4's interest.

I am kicking myself. Monson Savings Bank was willing to do 4.1% with 70%LTV back in July. I shoud have done that. Instead, I waited for the seasoning period to be over and to get a better %LTV with Fannie and Freddie type loans.

I know it sounds stingy to sweat over 1% interest rate but that makes ~$100 monthly difference in cash flow. For a managed property, you are working with thin margins. So, $100 makes a difference in long term cash flow.

@Chris Seveney

For now it is in my own name. I haven't decided whether I should put it in an LLC or trust yet.

@James Denon ok - if it’s in an LLC rates may even be slightly higher. I would check some major players like quicken loans or a local credit union as well. Check with country bank or some of the banks in holyoke or Springfield as well besides MSB

My cash out refinance that I did in December 2017 was a commercial loan 15 year with a final payment of 60k at the end that I can refinance at 4.25%.

While you, and might I humbly add, I, may feel we are better bets than owner occupied, the stats say otherwise. So that's the reason for that.

And in July the 10 year (and all rates) were significantly lower, which I'm sure you understand, so can't go apples to apple on quotes now vs July.

On investment property in general they are never thrilled about cash out to 80-85 LTV. And last 12-24 months they (banks) are starting to see the cycle getting a little long in the tooth and are tightening.

And the more properties you acquire the lower they will want your LTV, but also lower the rate you will get quoted.

Matt

Try freedom, westfield, Farmington, or Florence

Rates have gone up in the past few months but they might be able to get closer to 80% ltv

@James Denon Rates have gone up by about 0.75% since start of the year. So you are not going to find a lower rate of a 30 yr fixed conventional loan. You might find a lower rate on a commercial 5 yr balloon, but then you are taking the risk. Rates are headed up, so when it comes time to refi in 5 yrs, you will be paying an even higher rate.

Originally posted by @James Denon :

I need some help.

I am getting ready to cash out refinance a property I bought all cash back in June 2017 in Springfield, Massachusetts.

I got couple of quotes. All of them are in the low 5 to mid 5's with couple of thousand closing costs @75% LTV which is pretty high in my book!

I have perfect credit and no debt.

I am surprised that non-owner occupant, 3 family is penalized so much over an owner occupant.

If anything, I am more capable of paying the mortgages better than an owner occupant because the property produces more than 3.5 times the mortgage payment. It is professionally managed.

Does anyone know credit unions or banks that are more investor friendly and who can make logical risk assessments? Preferably 80-85% LTV with low 4's interest.

I am kicking myself. Monson Savings Bank was willing to do 4.1% with 70%LTV back in July. I shoud have done that. Instead, I waited for the seasoning period to be over and to get a better %LTV with Fannie and Freddie type loans.

I know it sounds stingy to sweat over 1% interest rate but that makes ~$100 monthly difference in cash flow. For a managed property, you are working with thin margins. So, $100 makes a difference in long term cash flow.

 Rates are trending upwards and will probably continue that way for a while, you and everyone is pissed, yup, that's where things are at, let's move on dot com. 

When you get a mortgage in a rising rate environment, there are three possibilities for the future: 

  • Rates continue to go up. Good thing you locked in what you could, when you could!
  • Rates flatten out. It's a wash. It is what it is.
  • Rates drop. You refinance and harvest the improved cashflow!

No point in worrying about July 2017. There is no time travel allowed. 

Try bankrate’s mortgage lender aggregator. Online lenders usually have the best rates and lowest costs because their cost of doing business is lower.

@James Denon

They are still historically low- what is your goal with the cash out refi?

@Steve Bracero I would like to get some capital to invest in more properties and to maximize the ROI.

It is hard to find good deals these days. Everything becomes a bidding war.

@James Denon Hi James. I think if you found a lender between 70% to 80% LTV you would be within the norms. The interest are higher so that may be something you have no control over. Your closing costs seem high though. For a property that is not transferring title,, your closing costs should be lower. Appraisal, bank underwriting and origination, and then recording fees. I pay less than 1K when refinancing.

@Matthew Enos 1K seems really low for closing costs. The title insurance plus appraisal costs more than that. Do you roll some expenses into the loan? 

No point in worrying about July 2017. There is no time travel allowed. 

 Maybe but check with @Elon Musk to be sure!

Originally posted by Account Closed:
No point in worrying about July 2017. There is no time travel allowed. 

 Maybe but check with @Elon Musk to be sure!

 A lot of the famous techie people have trash credit. I wouldn't necessarily trust him without running his.

Not versed on Connecticut title charges; however it seems competitive. I ran your scenario and can up right around 5 with similar cost (Illinois) The online thing can be a big myth. You have to check their assumptions. 

@GR Blanke I’ve both purchased and refi’d online. Not done cash out refi. There were no myths in my experience.

@James Denon I hear you on this. I began the cashout-refi process in August with a quoted rate of 4.125 but couldn't close since renovations were delayed so I picked up the process again this month and they shot up to 4.875. (I'm owner occupant) I was shocked at the increase in only a few months. 

Cash out refi'ing my OO duplex right now with a portfolio lender...89.5% LTV at 4.375%

James I am guessing you haven't been around for the 80s when interest rates were as high as 17%. Since 2001 when rates were dropping and then became 0 at the FED the rates we have had for the last 15 or so years are not "normal" In fact I would say we have been spoiled and I would even be sold to bold as to say this: Get used to it getting higher, much higher. I would take it and understand that the rate is irrelevant because you are deducting it as an expense anyway. If you hesitate you will be upset that you didn't take the rates today when you are paying 7 or 8 by next year

@James Denon

It may seem like a short term loss.. but the rates have been climbing over the last 8 months 

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