Refinance from 15 to 30 year

3 Replies

I know people often refinance from a 30 year to a 15 if they can get a competitive rate that does not dramatically increase the monthly payment. I am looking at doing the opposite. I bought a property (my first) with a 15 year VA loan. I bought the property before I started seriously educating myself and diving into real estate (a mistake I know). The plan is to keep the house as a rental property. I am moving sooner than expected and do not have a ton of equity in the property. That said, the monthly rent I expect to get will not quite cover the monthly mortgage payments. I am considering refinancing from the 15 year loan to a 30 year loan using a VA Streamline or VA IRRRL. I can lower both my interest rate and my monthly payments in order to achieve positive monthly cash flow. I know I will end up paying more in the long run on interest, but I will also be getting a better return on the investment as opposed to having to cover the difference between the mortgage and the monthly rent brought in. Just looking for other people's thoughts/comments/insights on this use of refinancing.

@Bennett Smoot I do see this somewhat often.  It's hard to predict the future so don't hit yourself too hard on this.  You made the best decision at the time and now you need to make the best decision now too.  A 30 year loan will not only help you cash flow....it will also help you QUALIFY for other loans in the future.  Remember, the more debt you have, the more that affects how you qualify for things.  All of your mortgage interest is tax deductible and most businesses seek to defer debt.  Your own home is different.  But on a business asset deferring that debt is one of the preferred strategies out there.

Now, having said that, please keep in mind that you can only have 2 VA loans at once....at there are restrictions on how to get a 2nd VA loan. If you don't need a VA loan on your next home, then no worries. But if you were counting on using the VA again, then we might need to strategize a little more.

Hope this helps!