Refinance, Pay Down, or Buy, or Other.....

3 Replies

I have owned a house, not my primary residence for 12 years. 

Purchase Price = $108,250

Zillow Value - $130,000

Rate = 5.75%

Payment = $822/month

My disabled father has rented it from me for the last 7 years. He is on a fixed income, so he only pays $600 per month. Yes - I am subsidizing his house, which I am fine with and I can afford.

Chase is offering to refinance my mortgage, no cost to me, 4.5%, so my payment will be <$700/month.

Options :

1. Only refinance the balance of 75k and almost break even with rent.

2. Pay 25k on mortgage and refinance 50k. Have a small cash flow.

3. Take 25k, and purchase another property ( if I can find one ).

Thoughts on cash flow, taxes, etc... will be appreciated!

My thinking is this:

1. Pay 25k to reduce mortgage from $800 to $400 ( 20 years @ 4.5%). This is pure cash flow of $200/month, ( or $200 reduction + $200 I have been paying = $400 ).

2. Use 25k to buy another property (if I can find one ), fight with tenants, for the same cash flow.

@Alan Hicks - What are you looking for? If you're looking for effortless cash flow, then paying down the mortgage makes sense. 

If you're looking for a high return on your investment, appreciation, and cash flow with a little bit more work then the rental property makes sense.