Hey new investor here, just wanted some input. I currently have a home purchased in an positively appreciating market which I bought for 138k (new build) with 20% down.
I got it at 6.125% interest rate. So p/i is $715.26.
I got another bank that’s quoting me 4.375% for 5k in closing +1.5 points (around 6.5k). They also require I have 75 ltv currently at 80 so I’d have to put an extra $7284 into the house to refinance.
If I didn’t build cost of refinance into loan, difference is $198.26 from monthly payments. It sounds like a good deal to me. What do you all think?
Forgot to mention new p/i is $517.00.
So you will have to put in 12k, and the loan will cost you 11.5k in closing costs. The savings is 198.26 a month. Taking 12k off the table and putting it into the loan has opportunity cost. What that opportunity cost is, is a question for you.
The breakeven point without considering the opportunity cost of the money is:
11500/198.26/12 = 4.8 years
If you are super committed to keeping the loan for the full duration, maybe it is worth it. Otherwise, the downside is even greater if you were to sell the house in say 2 years.
This being said, I think you should shop around for a better refinance product with less fees.
@Tyler Weaver thnx for the response bud! I’ll give some more banks a call tomorrow to see if anyone is willing to give a better deal.
@Jefferey Chheuy what state?
@Jefferey Chheuy look into US bank. Both the rate you’re paying and the new rate you got quoted seem outrageous! Make sure to pit lenders against each other to earn your business.
Best of luck!
@Jefferey Chheuy Go look for a mortgage broker licensed in your state. I’m assuming you are going conventional for your investment property?
@Nicholas Covington yes I was going for conventional. I checked with a couple other banks and a mortgage broker but no luck yet finding a better deal. I'll keep looking!
@Jefferey Chheuy I was going to say become a pro member and check out the financing pro perks. Guaranteed Rate was running a special right now for BP pro members in which they are waiving lender origination fees. I just refied with them and the process was very efficient. Id shop around, I called 6 lenders and received a wide range of rate quotes.
Is this property currently rented? What is your goal, just to lower monthly PI payment?
If it was me Id find a better use for the 19k, use to add another property maybe. If your numbers are right on this property, the rate shouldn't matter as much since the tenants are paying it anyway (as long as this was a good deal in the beginning). Spending 19K to refi is just buying increased cash flow, not creating it. If you could get some cash out it might be worth it but in your case your having to put more in.
@Will C. Thanks for the advice bud. It's unfortunately negative by 130/month after all expenses. It was one of my first homes, I got too excited, and it doesn't cash flow positively. I didn't know numbers very well so I wanted to try to fixing the problem with a refi, learned a lot at least lol.
Property is rented but I think I have it under market rent so will raise it next year; goal was to at least have positive or even cash flow so I can work on other projects without having it drain my cash flow.
I'm not so great at finding deals or rehabbing yet so creating a deal is hard right now. But, I did just get an offer accepted on a fixer upper to learn the rehabbing process and will be trying to buy some wholesale deals. Going to attempt driving for dollars in in a couple weeks also. Hopefully I'll get better moving forward.
@Jefferey Chheuy the good thing about RE is that over time a mediocre deal can turn into a decent deal. Some will say just sell and find a better deal now. Or if you find a super deal that cash flows well to cover the loss on this property. Many ways to look at it.
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