I bought a single family home in Florida in 2005 to use as my primary residence. When I had to move out of state, I converted it into a rental. I currently under water on this mortgage by about $20K.
The rent I am able to collect is around $1200 per month which is far below my holding cost of $1550. I have an interest rate of 6.125% and thought that I might investigate refinancing the property.
At this point I'm not sure about the best course of action. I hesitant to refi and add more negative equity with closing coats, as well as start the
What are my options?
Refinance - but then how much deeper am I going in terms of cost on this home?
Sell - take the loss?
Do NOTHING - continue to pay the higher interest rate and have negative cash flow each month on this property.
I would truly love to get this property cash flow positive... But I do not know how to go about it!
I would explore refinancing with a goal of finding a low closing cost bank. If you could decrease the gap between your holding cost and your rent, I think that would be preferable to walking away or eating a significant loss. The principal paydown and tax shelter still seem preferable to bringing 20k+ to closing IMO.
Call your lender and see of you can simply renegotiate the rate. Since there is no equity - in fact there is negative equity - there is really nothing to refi against. No new lender is likely to give you a 110% LTV in a refi deal. Your current lender, though, has a lot of incentive to negotiate a better rate to prevent a short sale or foreclosure and if you can save some interest expense while they still get on time payments, it is a win-win.