I have a second home that my disabled father lives in and 'rents' from me.
I have owned it for 12 years.
Mortgage Balance = 79k @ 5.75% ( worth around 130k, paid 108k )
Mortgage = $812
Rent = $600
Net = $-212 each month (yes I lose money every month )
1. Pay the balance down to 50k, and finance back to 30 years:
50k mortgage @ 4.5% = payment would be around $350/month ( includes taxes and insurance ).
So, I would no longer be losing money each month ($212), and now would be bringing in more rent than mortgage ($255) = that's total is about $450 each month.
(450*12 = 5604) / 29000 invested = 19%
So, taxes/insurance are $100 (50k mortgage @4.5% is $250/mo, you say total is $350 a month.)
Why not just refinance the whole 79k at 4.5% for 30 years, payment is $400+$100, now you're making $100/mo on $0 invested.
Your $29k additional investment is returning $150*12/29k, or 6.2%.
Thanks for the reply.
I agree that the rent-new mortgage = $150. Actually a positive value.
But I counted the $-212 that I am paying today + the $150 upside = $450. I cannot discount the break even point.
If I finance the balance (79k) back at 30 years to match the amount of rent (600 / 600 ).
Cash flow would increase by $212 ( the negative I am paying today ).
I assume I can still use as a tax deduction.
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