Should I refinance to increase cash flow

Question

Hi BP community! I'm looking for some opinions on this. I am currently managing my first rental that was at one time my wife's primary residence. It is a SFH that rents for $1,100 a month and the mortgage is a few dollars under $900 per month. Problem is that at the time of the loan origination, interest rates were higher and we currently have a rate of 5.5%.

We have paid on the house for 7 years of a 30 year mortgage. Should I refinance into the low 3s to increase my cash flow to around 400 a month or should I leave it as is? Thanks for the help everyone.

Will Chamberlin · Answer

Hi @Andy Hailey, I am in the same boat and decided to refinance. I have a duplex that is basically breaking even but we will save $550 by going from a 5.5% fixed down to 3.5% on the remaining principal (no cash out). We are going to use this cash flow to pay down the HELOC we use for down payments so that we can buy more houses sooner. I am not a banker but I think this would also help out DTI since our overall expenses are going down while rent stays the same. If you don't need the cash then maybe it doesn't make sense to refi but for me it was the way to go.

- will