Is refinance the way to go?

Question

This is very important to me as I have never purchased property and now I need to in a very short time frame. My sister and I each have 50% ownership in 20 acres in Poolville, TX.  My house is on the 20 acres and now my sister wants to sell her 50% interest in the property.  She has offered a good price of 100,000.00.  I found a lender who is willing to finance the 100,000.00 as a refinance at 5% adjustable rate.  I have a credit score of about 700.  Is this the right way to go? Do I need to be aware of any issues? Please help as my sister wants to close by next month.

Adam Kay · Answer

Glad you found a great fixed rate option. If at all possible, always stay clear of ARMs.

Great quote and advice by your dad!

Vickie Bruce · Answer

Thank you very much for your input Rob Lee and Scott W. Due to your advice I found a different lender who offered a 3.65 fixed rate over 20 years.  Also. I wanted to add that the reason I really wanted to keep this 20 acres is because my dad bought it back in the 80's and improved it.  He offered me and my sister both the opportunity to build a home and live here.  I chose to do so but my sister did not.  There is also rental property on the North part of the acreage but need lots of repairs. I've decided to take out and extra 30,000.00 to make repairs then let the income from the 2 rentals pay the mortgage.  I hope this was the right thing to do. I can hear my daddy saying as he always did, "Property will never go down in value, only up.  Never sell a piece of property."  Thank you very much for your advice.

Scott W. · Answer

@Vickie Bruce, another option you could consider is splitting the 20 acres in half and selling the other 10 acres to pay your sister off.  You’re living on 20 acres now so you probably enjoy it,  but you might also be able to get a little creative if you don’t want to have the burden of refinancing or keeping all 20 acres.

Scott W. · Answer

@Vickie Bruce, I agree with Rob Lee that you should get a fixed rate at a very good interest rate.  Now the deeper question is does it make sense for you to keep the property and buy your sister out and will it meet your short term and long term goals. Praying for clarity and wisdom as you consider all your options!

Rob Lee · Answer

Interest rates are low right now. Keep looking for a fixed-rate mortgage. An ARM can cause problems down the road. https://www.investopedia.com/terms/a/arm.asp

Vickie Bruce · Answer

Thank you. I guess because I have never bought property before and didnt know that I had that option.

Rob Lee · Answer

Why an adjustable rate? How many lenders did you reach out to? If at all possible, you want to get a fixed rate.