To refinance or not to refinance right now?

[Korey Ralston]

Good afternoon everyone,

I’m weighing the pros and cons of refinancing one of my properties in today’s market and would really appreciate some input.

I purchased one of my first properties about 3–4 years ago using the house hacking strategy. It currently has an FHA loan with an interest rate around 5.25%. With property values increasing in the area, I've built up a solid amount of equity.

I’m considering tapping into that equity to grow my capital and potentially reinvest, but refinancing right now would likely mean taking on a higher interest rate, which would tighten my margins.

For those of you who’ve been in a similar position—would you move forward with a refinance in this kind of market, or hold off and see how rates play out over the next several months?

Appreciate any insight or experiences you’re willing to share.

[Jay Hurst]

Quote from @Korey Ralston:

Good afternoon everyone,

I’m weighing the pros and cons of refinancing one of my properties in today’s market and would really appreciate some input.

I purchased one of my first properties about 3–4 years ago using the house hacking strategy. It currently has an FHA loan with an interest rate around 5.25%. With property values increasing in the area, I've built up a solid amount of equity.

I’m considering tapping into that equity to grow my capital and potentially reinvest, but refinancing right now would likely mean taking on a higher interest rate, which would tighten my margins.

For those of you who’ve been in a similar position—would you move forward with a refinance in this kind of market, or hold off and see how rates play out over the next several months?

Appreciate any insight or experiences you’re willing to share.

The 5.25% is not as cheap as you think because it is an FHA loan. If you purchased prior to March 2023 you are paying .85% in mortgage insurance a month. Assuming a 300k loan that is 212.50 a month with none of that going to principal. Your effective interest rate when taking into account the MIP is 6.10%, not 5.25%.

If you purchased after March 23 the MIP is slightly better at .55% which is 137.50 a month in MIP, so an effective rate of 5.80%. and that MIP cannot be dropped on a FHA loan.

If you are still living in the property you can get cash out rates very similar to those effective rates (assumng good credit) AND get the beenfits of putting the equiy to work as described above.