Cash-Out Refi Analysis

[Sean Bozigian]

Hi everyone, 

I've been kicking the tires on a cash-out refinance to continue to scale for quite some time. With the recent rate cuts, I decided to jump on it a bit earlier than anticipated. This is my first refi and I'm looking for some advice in helping evaluate this scenario. 

I purchased a duplex in December 2018 for $260,000 that I'm currently house hacking. Between market appreciation and forced appreciation (cosmetic rehab), my conservative estimate on the property is $310,000. My current interest rate is 5.25%.

I have the option to buy down the new rate to 3.625% and save $161 per month on my mortgage payment. The kicker is that closing costs would total close to $8,500, leaving me with roughly $15,000 cash back in pocket. I plan to use all of the cash to help fund my next cash-flowing property.

The break-even on the closing costs is 5 years when factoring in the mortgage savings. I have no plans on selling this property anytime in the foreseeable future, so when I look it at through that lens, it still makes sense. I have a lender that I trust and have worked with in the past and we've worked through a couple of different rate options and this appears to be the best value. However, I just have some speculation when it comes to the closing costs. I wanted to air this out and get some opinions. 

Thanks in advance!

Sean