BRRRR 30 year vs 15 refinancing?

3 Replies

This may be a silly question, but why does everyone seem to refer to the 30 year mortgage when talking about refinancing in the BRRRR strategy? Could it not possibly be better to do a 15 year mortgage to reduce the amount you are paying in Interest thus building more equity?

I think people want the lower payment requirement with the ability to make extra payments as they're able to reduce the length of the loan on a 30 yr. If disaster strikes and you have to make major repairs you wont have the option of lowering your payment if you're locked in at 15 yr.

Remember, your tenant is making your mortgage payments for you.  The less your tenant pays, the more rent you get to keep.

When comparing the 15 year to the 30 year mortgage, less isn't necessarily more.

Originally posted by @Jonathan Klemm :

This may be a silly question, but why does everyone seem to refer to the 30 year mortgage when talking about refinancing in the BRRRR strategy? Could it not possibly be better to do a 15 year mortgage to reduce the amount you are paying in Interest thus building more equity?

I will tell you why! DTI

As you build your portfolio DTI will be the #1 obstacle with getting more properties.

So let's look at two different scenarios: 

Assume you make $50k a year and have no monthly debts.  You are buying properties for $250k with 20% down that meet the 1% rule ($2,500/mo rent) and the 50% rule for expenses.

30 YEAR FIXED:

Income/Mo $4,166
Max DTI 45%
Max Monthly Payment $1,875
Property #1 Rent $2,500
Property #1 NOI $1,250
Property #1 Mortgage $1,000
Property #2 Rent $2,500
Property #2 NOI $1,250
Property #2 Mortgage $1,000
Property #3 Rent $2,500
Property #3 NOI $1,250
Property #3 Mortgage $1,000
 
Property #4 Loan Approval = $525,000

15 YEAR FIXED:

Income/Mo $4,166
Max DTI 45%
Max Monthly Payment $1,875
Property #1 Rent $2,500
Property #1 NOI $1,250
Property #1 Mortgage $1,500
Property #2 Rent $2,500
Property #2 NOI $1,250
Property #2 Mortgage $1,500
Property #3 Rent $2,500
Property #3 NOI $1,250
Property #3 Mortgage $1,500
 
Property 4 Loan Approval = $225,000

So you can pay it off like a 15 year, but if you plan on growing it will be MUCH easier with a 30 year on paper

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