Refi dilemma - what would you do?

Question

Hi RE gurus,

I've finally mustered up some courage and decided to get into RE investing. In prep for that: I have about 50% equity in my home (value 2Mil+) - and I have the following cash-out refi options for the remaining mortgage amount - locked. I'm in a dilemma as to what to do:

1. 2.5% 5/1 ARM with cashout upto 65% LTV - no cost, no points

2. 2.5% 10/1 ARM with cashout  upto 70% LTV - $14k in cost and points

3. 2.625% 10/1 ARM with cashout  upto 70% LTV - no cost, no points

Regd my primary residence - I don't intend to stay here permanently - about 10 years more.

With the cashout proceeds - I would like to buy an investment property or two (local, not out-of-state).

What would you do, if you were in my shoes?

Thanks!

-R

Collin Chan · Answer

Just to put it into perspective as someone did for me.  If you're borrowing at 2.5% and the USD is losing 2% annually.  You're essentially getting free money.

Collin Chan · Answer

@Rich Pritzker My opinion is you should do option 3 and pull out as much equity as possible.  Seems like it will be around $600k.  I'm doing the same and using it for a number of investments but focusing on cashflow investments that can pay the mortgage and then some.  You can do local but it's pretty competitive for good investment properties but they're out there.

Johnson H. · Answer

Hi Rich, I like option 3 the best as it’s a 10/1 ARM that’s not much higher than option 1. The breakeven on option two on the cost will take more than just a few years. The rates between option 1 and 3 is not much more to get another 5 years fixed. Who knows, maybe rates will be lower again and you can refi. Which lender is this, the rates are really good!

Rich Pritzker · Answer

Thanks folks for chiming in!

@Collin Chan - Thanks! trick is to find those good properties. As many here remind everyone - money is made

@Phil Collett - Heloc is an option - and i already have one - which I will request for subordination to the new first lien I get.

@Johnson H.-  Will DM you

Phil Collett · Answer

Option 4 is a HELOC. Variable rate though, but 80% ltv. I did 1 last year and it was at .8 below wall Street journal rate. Mine had not costs unless I refi within a year then $400.

just looked at refi of my 1st lien (@ 3.625 to maybe 3.1), and of course the HELOC makes that harder.

Refi dilemma - what would you do?

Most Popular Reply