Mortgage rate heading south - refinance 3.5 30y?

[Kumar Gaurav]

Hello,

I currently have a 30 year Mortgage loan at 3.5 rate of interest on my owner occupied triplex that I bought less than 3 years ago with 20% down at 750k pp.With the mortgage rates getting lower and lower when would it make sense for me to refinance? should I wait a little longer? Would it make sense to cash out refinance? Appreciate your feedback.

Thanks

[Bill Brandt]

I’ve “heard” rates are temporarily artificially high because the mortgage financiers have all the business they can handle already. I would say rates are more likely to edge down a little than up much. If you can save over 1/2 a percent rate or save all the refinancing costs in less than 18 months I’d go for it. Can you afford the 15 year? Are they still much lower? They used to save you 1/2 a percent on that alone. 

[Raymond J. Rodrigues]

@Kumar Gaurav if you can get a better rate while cashing out,  I don’t see why not.  I just got someone a 3% interest rate on their refinance, zero points. 

[Steve Morris]

"when would it make sense for me to refinance? should I wait a little longer? Would it make sense to cash out refinance? "

1) I usually tell people that if you're holding the property for a while, if you can pay back all the fees thru saving within 2 years, I'd do it.  If you're going to sell in six months, that's different.

2) Right now, at under 3%, you're getting close to the bank's margin, so I think that's it.  By margin, if the bank pays 0.5% on deposits and loans to you at 2.75%, margin = 2.25%.  Sorry to say, banks need to make a profit

3) The reason you may want to wait is the banks are nervous.  So while rates are low, they're getting lot tougher on underwriting and making it harder to qualify.  I closed a prop (am an apt broker) and FMAC is getting tougher than 6 months ago.  I think things with Corona and the economy will sort out in a few months, but that's up to you to decide.

4) On cash-out refis, first thing to consider is LTV. They'll need an appraisal, but (being extreme) if you took out an I-O loan 2 years ago (principal bal hasn't changed) at 70% LTV and the value hasn't changed, odds are you won't get cash-out. This is one area lenders are getting pickier on is exposure.

5) On cash-outs, it varies, but if you're using the money for something outside the prop (like kid's college or something less noble, like a Porsche GT3 RS - I drive a Mazda so may be biased), I'd think hard, since it'll affect your tax-shelter cash-flow negatively.  If you're taking out $100K to fix roofs on the property, that effectively adds $100K of value to the property, so I don't have a problem.