Refinance or not to refinance?

Question

I bought my first house using FHA Loan and the data is as follows:

Fixed Interest: 5.75%

Loan’s first payment was made on 01.01.2019

Term: 360 months

The question: I am a year in and I am wondering if it is worth or suggested to refinance to lower the interest rate and use the free cash towards my investment property. I am seeking ways of how to start out as a RE investor.

Aye or nay?

Craig Curelop · Answer

@Mario Essig - I have never been in your position, but I have talked to many investors that have. The most notable being J Scott who had done hundreds (if not thousands of flips). His exact words were, "I regret every house that I ever sold."

If you can refinance with a conventional loan and rent it out while cash flowing, I would 100% suggest keeping it. If you can't, maybe you do a live-in-BRRRR where you fix it up, rent it out, and then refinance it?

Matt Groth · Answer

You could do better on rate, but if it was fha, did you only put 3.5 percent down? Any other bank would require 20 percent down. Unless the house appreciated a lot, or you got an amazing deal, you would need to add cash to make it happen. This is the problem I see with fha.  It is fine, in the right situation, but your rate isn't that good, you are probably paying pmi,  and if you have to sell, or want to refinance, you will need to add cash.

Cameron Tope · Answer

@Mario Essig we need some more information. What are the current rates? Are you paying PMI? Will you qualify to drop PMI if you refi? How much equity do you have? Are you serious about buying an investment property? What price point?

Those questions will help determine the best way forward.

Mario Essig · Answer

I want to add, I am living in this house and am not house hacking.

Refinance or not to refinance?

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