Cash In Refinance
I have two recently acquired single family units. House #1 was purchased for 315k in October 2024 (appraised for 325k), currently at a 7.5% 30 year fixed interest rate. House #2 acquired for 325k in April 2025 (appraised for 335k), currently 7.375% 30 year fixed rate.
My question is this: should I refinance? Being offered a 5/5 ARM with starting rate of 5.875%. I would need to pay down equity of both houses to 75% LTV (15k costs), 6,000 for escrow accounts and 6100 for closing costs. Would get $4400 of skipped mortgage payments and $3000 from old escrow accounts. All this to free up $300 of monthly cash flow for each property ($600 total monthly).
So my calculations it would cost me truly 6k of refinance fees but I'm gonna include the fronted escrow and principal paydown. My calculator says it's a good ROI for the fronted money. I'm 33 and plan to keep properties for foreseeable future…other two rentals cash flow combined $1750 a month and large amount of equity. Thoughts and opinions are much appreciated!
Most Popular Reply
If the deals will support it a DSCR loan might be a better option than an ARM. You wouldn't be able to prepay the loan with a DSCR and there would likely be at least a 3 year prepayment penalty to refinance again but the rate would be locked in.
I worry about having to refinance an ARM at the end of the rate lock based on the current whims of the economy and mortgage rates.
My sister did some ARMs on SFHs during Covid and just had 4-5 houses rate adjust in the past 3-4 months and she got absolutely slaughtered on her new rate. Her mortgages went up on average $500 apiece which destroyed her cash flow despite having around 60% LTV.
For that reason I do not like ARMs.