Mortgage Renewal - What are my options

4 Replies

Hi there... 

Newbie (to the BP forums) Canadian investor here.  Hoping to get your input on my upcoming mortgage renewal. Below is a summary of my situation.

- I am coming up on the 5-year renewal of a 25-year mortgage (20 years remaining). 

- Accumulated about $50k in equity 

- House is a mix of rental units and I live in one.

- Approx. negative $350 in cash flow per month.

Question - Aside from aiming to refinance so the property is cashflow positive (eg. by refinancing remaining principal on a 25 or 30-year mortgage) are there any other objectives I should have in this refinancing?

- Should I aim for the longer term to reduce the monthly mortgage so I am cashflow positive?

- Should I aim to pull out as much equity as possible, then reinvest?

- What am I missing or should be thinking about?

Thanks in advance! Happy to be a member here now. - CB

While I'm still waiting for your post to be verified, I wanted to offer you some tips; in general with mortgage renewals your options are: 

- Pay off the owed amount

- Refinance with a different mortgage note

- negotiate an extension of the loan with the bank, if it is a commercial type of loan with a finite period (like an interest only period on a construction loan)

Good luck on the journey!

Hey @Cory Brown !  By "owed amount" I simply mean the amount of the mortgage that would be replaced by the new (refi) mortgage.

Now that I can see the entire original post, I wanted to add some thoughts here.  

Whether to focus on pulling out equity or doing a standard refinance in order to lower your monthly payments (therefore hitting a positive or nearly positive cashflow) I'd recommend that you focus on which one fits your goals and needs more.  

To pull out more equity will allow you to use the equity elsewhere, but will likely raise your ongoing costs of living.  That affect will remain in place for quite a while.

Conversely, to refinance the existing loan into a lower % interest loan and achieve positive cashflow for the property you live in personally means you are achieving an EXTREMELY low cost of living, which is an affect that will remain in place as long as you live there.

So, if having an extremely low cost of housing fits what you need right now then you've got a stellar option to live inexpensively.  If that isn't valuable to you, then you'll probably find that the equity you've built up can achieve a higher Return on Equity in another investment.

So, dig into which path helps create the life that you want real estate investing to create, and then roll on!

I think @Will Fraser summed it up very well. Remember, even though you’re -$350 cash flow, you can also look at it as being positive $450 if your place is worth $800/mo.

But at the end of the day, it depends on your goals. If you want longer term money, pay down your mortgage as quickly as possible.

If you’re interested in RE investing, figure out how to pull some cash out to buy your next property.

Lots of options - depends on what you see as your goals!