REFI with higher rates?

7 Replies

I like to raise rents lightly every year, that added with small principal pay downs, I REALLY like cash out refi's where I can then buy more property.  Problem now is that rates are much higher than before.  Recently quoted on 5.25% on one, where I'm only paying 3.675....Tough to leave too much idle cash in a property but a real kick in the nuts paying a much higher rate!    What do you all do?

I am looking at a HELOC thru PenFed for taking out equity. My original mortgage is around the rate you paying too. The PenFed product is a variable rate (prime +1% for non owner occupied). Of course there is risk with having a variable rate product, but I figure that it is still better then refi-ing a low interest rate with a much higher one.

Originally posted by @Janine Badic :

I am looking at a HELOC thru PenFed for taking out equity. My original mortgage is around the rate you paying too. The PenFed product is a variable rate (prime +1% for non owner occupied). Of course there is risk with having a variable rate product, but I figure that it is still better then refi-ing a low interest rate with a much higher one.

Only problem with a HELOC....not so sure that its tax deductible with the new tax laws, might wanna check on that

I believe it's still tax deductible as it's on an investment property and not on my personal residence (which would now be non deductible).

Originally posted by @Janine Badic :

I am looking at a HELOC thru PenFed for taking out equity. My original mortgage is around the rate you paying too. The PenFed product is a variable rate (prime +1% for non owner occupied). Of course there is risk with having a variable rate product, but I figure that it is still better then refi-ing a low interest rate with a much higher one.

Current prime plus 1% rate for penfed HELOC means 5.5% interest rate (and will only go up from there since its variable) for those particular loans. FYI in case that helps you all do your calculations to see if worthwhile. fixed 30 yr I recently got at 4.75 for a cash out refi. just food for thought..

I have a significant amount of equity in the property and it doesn't make sense in my case to pull out money I don't have an immediate use for, nor refinance the entire amount for a over 1.6%+ then I'm paying now.  I don't like the extra risk exposure of a variable rate line but I also don't like the thought of the refi profits sitting around doing nothing.  I do like the flexibility the line gives me to take advantage of GREAT deals if and when they arise without having the "pressure" to deploy capital that would be other wise be sitting around in a low interest bank account if I were to refi.

The strategy may not be desirable to everyone but I feel like it it better of the two options for me. :)

Originally posted by @Janine Badic :

I believe it's still tax deductible as it's on an investment property and not on my personal residence (which would now be non deductible).

That would still be deductible if you use the HELOC from your primary residence to purchase investment property.

David,

What is the average monthly net cash flow in your area @ 5.25%?

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