Should I keep my current mortgage or refinance.

Question

I bought my primary June of last year. Showed in my credit and it was $169,750 loan, 5.4 APR, $1,139 monthly payment. Due to some circumstances I had to refinance and because I was renting it out I had to refinance into a investment property. New loan as of June 2023; 135k, 9.25APR, $1,261.50 monthly Does have a potential 4,995 penalty and does not show on my personal.

I am able to refinance through a credit union with a loan amount of $134,788, 7APR (5Year-ARM), with an estimated monthly of $896.75. Will possibly show on my credit and still an investment loan.

I feel like it's the right decision so I can make more of a cash flow. Usually rent it out between 1750-1800 (all Utilities included). Refinancing it will allow me to keep it at this amount or possibly even lower it to be more competitive. But I'm stuck in between whether I want it to show on my personal credit report or not I'm not sure if that's a good decision. I currently want to purchase another home as an investment whether it's a DSCR loan or 20% down for a conventional, but I don't want the mortgage to affect me. What would you do?

Side Note: I do want to buy a primary in the next 4-6 months in officially I was tagged the right way.

Stephanie P. · Answer

The DSCR loan will affect you if you're buying a conventional loan.  The only way to have it not affect you is if you do DSCR loans going forward.

Here's how a conventional lender will find out if you have additional properties or loans:

If you get a conventional loan, the lender will ask you if you own additional properties or have any additional debt.  Any time you get a DSCR loan, you will sign a personal guarantee (whether you're in an LLC or not).  If you say no, you're committing mortgage fraud.

If you get a conventional loan, they lender may ask you for tax returns.  They don't always, but many times they do.  They'll review your Schedule E and ask about the property that's listed and they'll ask if it has any liens on it.  You'll say yes and they'll need the mortgage information.  Once they see it, you have to report it.  If you say no, you're committing mortgage fraud.

It may not show on your personal credit, but that really doesn't matter when it comes to whether you'll qualify for conventional financing.

Joanne Gonzalez · Answer

Oooo Rick I did not think of that, the way it is now I would not be able to lower rent but so much!

Maybe refi at a later date may be a better decision?

Rick Albert · Answer

How long do you plan on keeping the property? Typically those that do ARMs are banking on either selling or refinancing before the the 5 years.

Some experts are saying that rates will likely go down somewhere towards the end of next year. Calculate the cost of the refi and factor that in before going down the refinance route.

Otherwise on the surface, if you can lower your expenses, I would. Credit card debt is at a high, student loans are kicking in, and inflation is real. I'm not an economist nor a fortune teller, but I do believe that next year there are going to be some pain coming our way (not a 2008 crash or anything, more of a slowdown). With housing being people's biggest expenses, we may see future tenants pushing back on prices. You may need the wiggle room should rents take a small dip.

Logan Singleton · Answer

Hi, @Joanne Gonzalez . Most HMLs won't report their loans onto your consumer credit report since they will require you to close within an LLC or Corp. Granted. If you go to an HML, their loans are typically more costly.