Should I refi to a conventional loan from VA loan?

Question

Hey all,

New to BP, hoping to hear some of your savvy minds come together and help me with some options for my near future. Here’s a quick recap:

Purchased first home in 2014 in Pensacola, FL, using VA loan. Did some minor renos. Departed in 2017 and have had tenants in there ever since.

Moved outside Philadelphia, on the New Jersey side, purchased second home using the rest of my VA loan in 2018 (rented in the area for a year). Have been renovating since moving in (kitchen, bathrooms, backyard).

Next summer (2021) I must transfer units and move to a new area (hoping for Savannah, GA or somewhere in FL- FT. Lauderdale area or Jacksonville).

My initial thought is to sell both homes and use the money to put a down payment on a nice big duplex (a few good looking ones in the Savannah area) but I’m a little nervous about where the market may be next year (I’m assuming not a seller’s market?).

The other option I was thinking is to refinance my FL house with a conventional loan (to free up VA loan) and hold onto it a little longer with the possibly lower rate (assuming rental interest rates would still be lower than the 3.7% I have on it now), and sell the NJ home as well (free up the rest of the VA). This would allow me to keep the FL rental and use the VA on a single family or multi family at my next unit.

Any advice would be amazing. Thank you!

James Fennessey · Answer

Thank you all for the recommendations. My biggest issue is most of my capital is in my Florida home (I should make >$75k if/when I sell) and without doing so I won’t have enough liquid cash for a down payment on a conventional loan for the next place I move.

Michael Ferrell · Answer

Welcome James,

Having used a couple of VA loans myself, if I was in your situation I would keep the VA loans and use a conventional loan at my new location. Also in the last year the VA cap amount has gone up. Depending on how large your other loans are you may have some unused benefits with the new limits. A mortgage broker can help you figure that out. Another thing I am looking at is doing a IRRRL to lower my current interest rate. I have done these in the past on other homes and they are very easy (comparatively) with the right mortgage company.

Joseph Scorese · Answer

@JamesFennessey, First, thank you for serving our country.

Conventional rates are at a all time low, take advantage if you can whether to better cashflow or cut down on the amortization. Also, using your VA loan is smart to maximize buying power and monetize the mortgage house hacking the second unit. Let me know if you have any questions.

Regards

Joe Scorese

Dylan H. · Answer

@James Fennessey

I think it may be a little hard to find the rental loan below 3.7%, but may be wrong.

Savannah is a great market and would highly recommend. Would be happy to talk about good areas and connect you with an investor friendly agent.

Best of luck!