30 yr Fixed or 5 yr balloon amortized over 15 years??
Just looking for some advice. An offer has been accepted on my first rental house. Closing costs were much more than I was expecting (and what was originally quoted for me) on a fixed 30 year mortgage so now I am exploring another option. Here are the details:
Option 1:
Purchase price: $37,000
Down payment: $7,400
Closing costs with 30 year mortgage: $2743 plus $987 pre paid costs due at closing (tried to negotiate some of the origination fees but the bank wouldn't budge one penny)
Monthly payment with 30 year: $272.72
Interest rate: 4.5%
Option 2:
5 year balloon amortized over 15 years
Same purchase price and down payment
Closing costs: $1527 with no escrow so no pre-paid costs up front
Monthly payment: $327 (including insurance and taxes that will be paid separately)
Interest rate: 4.75%
The bank only charges a $350 renewal fee at the end of the 5 years
Monthly rent after management will be between 585 and 630.
I know this is not a ton of info on the deal but hopefully someone can weigh in. I am at work and had to type this up quickly.
I want to buy another home this year and the $2200 difference in closing costs will help me to do that sooner. I understand the cash flow will not be as great and that's what I'm weighing. Seems to me that saving that $2200 up front would make up for years of the difference in cash flow. Opinions?