BRR and now time to Refinance

BRR and now time to Refinance

Rental Property Investor · Oakland Twp, 48363 · Member since 2018 · 27 posts · 9 votes

If you have the option of these 2 loans. Which one do you take and why?

Based on a 110k home ARV

A 20yr rate is at 4.99% with a loan amount of $88K the principal and interest payment would be $581. Closing costs would be $600

Or a regular 30yr refinance going up to a 70% loan to value, the rate would be $3.875% with a loan amount of $77K the principal and interest payment would be $363. The standard closing costs would be roughly $2K and the additional costs because it's an investment to get the best rate would be $1800 - total closing costs of $3800 (11 k less cash out, 3200 more in closing fees, $218 less per month)

I am looking to purchase another home and have really good credit. So, I assume there is some value in cash but I could probably be approved to finance another home. Unless structural repairs make the future home in-financeable. 

Looking for opinions or coaching for what I should do by reading what you would do. 

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Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
7y

The safest loan is always the one with the lower payment. If you fail to make the payment, you will lose the house. Beyond that, the best choice for you will depend on your circumstances. The best path is likely to be different if your net worth is $50k or $5 million, if your annual income is $30k or $250K, if you have $20k in the bank or $500k. Find an accountant who is familiar with real estate investing and discuss some scenarios.

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  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    7y

    Where are you getting such a low rate on a 30yr loan? 

    Curt Davis - KAIZEN Realty538 Reviews
  • Rental Property Investor · Oakland Twp, 48363 · Member since 2018 · 27 posts · 9 votes
    7y

    @Curt Davis

    I think the $1800 buys the rate down.

  • Troy, MI · Member since 2015 · 7 posts · 4 votes
    7y

    @Mike Kratz

    I think it just becomes more of a numbers game how much cash do you want back how quickly do you want to pay these houses off. Obviously with less a month in house payment you’re going to make more cash flow but with the other one you’re gonna pay the house off faster.

    I think it really comes down to what works for you at this moment.

  • Rental Property Investor · Oakland Twp, 48363 · Member since 2018 · 27 posts · 9 votes
    7y

    @Hans Driesen

    It seems to me that I get an extra 14,200 cash out and a 20 year term vs a 30 year for $218/month.

    The property still cash flows $80/month if I assume a 1 month turnover loss (it is currently on a 2 year lease) and $75 capex. (All plumbing, electric, and HVAC was just replaced)

    Or what else should I keep in mind...

  • Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
    7y

    The safest loan is always the one with the lower payment. If you fail to make the payment, you will lose the house. Beyond that, the best choice for you will depend on your circumstances. The best path is likely to be different if your net worth is $50k or $5 million, if your annual income is $30k or $250K, if you have $20k in the bank or $500k. Find an accountant who is familiar with real estate investing and discuss some scenarios.

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