Need Advice on Refi'ing Two Homes

[JP A.]

Hi, I need some advice. Here is my 'situation:'

1st home is currently rented out to a tenant. Their rent pays my mortgage and taxes and I clear an extra $200 per month from that property. I still owe money on my mortgage, and I am paying PMI each month.

2nd home (my primary residence) also has a mortgage. I put 10% down, made improvements, I would imagine the appraised value is now higher than what I bought it for.

My questions are as follows:

• 1. Should I take the extra $200 per month and apply it to the principal of the first home balance? Should I apply it to the principle of my primary residence? Or just save it?
• 2. Does it make sense to refi the 1st home to a lower rate, and get rid of the PMI. This would arguably free up more cash per month from rent.
• 3. Since I made improvements to my primary residence, would it make sense to refi since equity should be much higher than 20% now and get rid of PMI? Refi'ing costs money, not sure if it is worthwhile doing.
• 4. If I do refi both, that frees up extra cash - what could / should I do with the extra? Pay down principal? Use it to fund some other investment?

[Justin Cambra]

JP I can tell you have been thinking a lot about this. To be able to analyze what the ideal financial or practical decision is we would need the missing piecies of info to paint the financial picture (interest rates, orig purchase price, current estimated value, PMI amount, etc). I am not a licensed financial planner but I think it would be interesting and fun to help you work through this situation. Shoot me a note if want some free help.

PS I like your goal of 10k passive income in 4 years. That is one year faster than I am planning.