Investing Options. Refinance or ...
3 Replies
Some links on this page may be affiliate links, meaning BiggerPockets may earn a commission. Affiliate links do not reflect member endorsement.
Alan Hicks Investor from Lawrenceville, Georgia
posted 6 months agoI 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 )
Option:
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%
Thoughts ?
Stuart M. from Boca Raton, Florida
replied 6 months agoSo, 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%.
Alan Hicks Investor from Lawrenceville, Georgia
replied 6 months agoThanks 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.
Alan Hicks Investor from Lawrenceville, Georgia
replied 6 months agoIf 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 ).
Anything else?
I assume I can still use as a tax deduction.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.