Refi or no?

Question

I turned my primary residence into a rental in February because I was unable to sell it. It's a SFH 3BD 1.5Bath in Parkville MD. I am on a fixed 30 year loan at 5.25 percent that just started in Feb (I refinanced from a 15 to a 30 when I rented it So I could cash flow the property) currently I owe 156k and it appraised for 212k back in feb. My monthly payment is 1152 and my rent is 1595. I only found this forum after I rented it So i realize now I have very low cash flow after considering true expenses. If I refinance it will add about 4k to the mortgage and my payment will drop 77 dollars and my rate will be 4.25. I anticipate raising rent at the end of the lease somewhere between 25 and 40 dollars.

Should I refinance knowing that it will save 27k in interest over the life of the loan but take about 5 years to recoup the additional mortgage being added on, all to cash flow an additional 77 a month?

My estimate true cash flow on the property now is 100 a month.

Just wanted some different opinions and why. I do plan to keep this a rental for the foreseeable future.

Thanks!

Tyler

Should I refinance knowing that it will save 27k in interest over the life of the loan but take about 5 years to recoup the additional mortgage being added on, all to cash flow an additional 77 a month?

My estimate true cash flow on the property now is 100 a month.

Just wanted some different opinions and why. I do plan to keep this a rental for the foreseeable future.

Thanks!

Tyler

Joe Villeneuve · Answer

Yes to your question regarding a refi to raise your cash flow.  It's not your money that is taking longer to recover...it's the lender's...that your tenant is paying for you, and paying you an added $77/month for the privilege.

Your money would have been the down payment, which will not change/increase with the refi, but will be recovered faster with the increase in cash flow.

Tyler Caruso · Answer

The short answer is my credit score was not in the top tier to get prime rate and now it is.

If I recall, the best rate available in feb was 4.5 or 4.625.

Larry Turowski · Answer

@Tyler Caruso How is it that you had to pay 5.25% in Feb, but could get 4.25% today?  That seems like a big drop.

I'd say if you might sell the house in the next 5 years then don't refi.  If you plan to hold onto it then go ahead an refi.