All Forum Posts by: Zach Wain

@Zack Francis - I am in the camp of preferring positive cash flow on a real estate investment, playing the appreciation play is a gamble.  While home prices are likely to continue to rise in the short run, I think we all should have learned that we have no idea what is coming around in the corner 3-5 years from now.  RE can not go up forever without a correction.  

That being said, consider putting 25% down instead of 20% down as it should drop your interest rate by about 0.5% and make the property cash flow much better.  40% is overkill IMO, the improvement to your interest rate is negligible at best.  But 25% down helps you avoid the largest rental property Loan Level Price Adjustments (LLPA's).

@Eric Kelly Something to consider as well. If you have a residential mortgage there is something called an acceleration clause in every mortgage note. Basically, it says that if you change to title out of your name that the lender can request you change title back to your personal name or they can call the note due. This rarely happens, people put title in their LLC name all the time. But, be aware of that rule.

I have heard people getting caught by the loan servicer because they changed their home insurance into the LLC or partnership name as well. The lender reviews insurance annually.

@Cecilia Flori - I recommend you reach out to Jeremy Madick, he is an insurance Broker and shops dozens of providers and shows you the top policies for that specific home/area/your profile.  He has saved a lot of my clients money.  PM me if you want his info.

Good luck!

@Timothy Allen

Conventional loans only require 3% downpayment based off the sales price. Fha requires 3.5% down

Both are great low down payment options that are fixed loans with low rates, and cheap pmi if you have a great credit score.

Helocs are usually variable rates and usually a higher rate than a conventional or fha fixed loan

@Mitchel Foster - Give Bobby a call at Black Diamond Pool, he was referred to me by a friend that has used him for a long time and we have been super happy.  602-332-4565.  Very nice guy, great service!

@Ray Martinez - we need more details to be able to give you a solid answer. What is your rate, loan term, loan balance, and estimated home value on your primary home? If you have a $500k 2.5% 30 yr fixed right now, and a cash out refi means going to 3%, than a HELOC might be better. If you have a 3.75% 30 yr fixed right now, than a cash out 1 piece loan is a way better deal. It all depends on the numbers.

A first mortgage refinance can come with $0-$15k in closing costs, its all about how the lender structures it.  I prefer low/no closing cost loans when possible because refinance or sell more often than they think they will.

HELOC's have low closing costs, but have a higher interest rate than 1st mortgages. Its also a variable rate that sounds decent right now, but in 2-3 years when the Federal Reserve raises the Fed funds rate all HELOC rates will go up.

The majority of time, the math points towards a low closing cost 1st mortgage refinance, unless your current loan terms are insanely low.  Send me a DM if you have any questions, I am happy to help

@Chelsea Anderson - great quote, I totally agree.  Super difficult for some people (myself included) to do. "sometimes looking at the house as a 3-5 year stepping stone instead of a forever home can cut out some of those "dream home" emotions."

@Jason Howell - correct.  80% loan to value on a new first mortgage.  Assuming the value is $367,000 means a new loan size of $293,600.  This new loan will pay off the existing mortgage of $218,000, so $75,600 cash back to you minus any closing costs.

@Ibrahim Yamini - Use $70k-$75k as the cash out number but the rest of your plans are accurate. I would also consider going with a low closing cost loan and taking a higher rate rather than paying high closing costs for a very low rate because it sounds like its 50/50 if you will stay in your home for a long time. If you save your VA loan benefits for a future primary home purchase that is great, but if you dont move for a very long time you may consider refinancing into this mortgage again in the future. Low closing costs is better for the vast majority of borrowers.

@Ibrahim Yamini - Thank you for serving our Country!

If you are active military I assume you will have a VA funding Fee on any cash out refinance or new VA purchase (this is waived for Veterans with a service connected disability). This is important because this fee is financed, but it is a major closing cost that needs to be accounted for.

On all cash out refinances (VA), the funding fee is 3.6% of the loan size. For your cash out refi scenario, $330,300 loan size will have $11,890 financed on top for the VA funding fee. Expensive!!!

On a new VA purchase, the VA funding fee is 3.6% with 0% down (it is cheaper when its your very 1st time using VA). But, if you put 5% down, the VA funding fee drops to 1.65% which is much more tolerable.

My 2 cents, since you have equity in your primary right now, consider a cash out conventional loan to 75%-80% loan to value and that may net you $70k-$80k. Live in the home for a year, and then rent it out and buy a new primary home using a VA loan with 0%-5% down (to reduce the VA funding fee). That leaves you funds to continue to invest and buy other homes down the road, make repairs and upgrades, rinse/repeat.

DM me if you want to gameplan and come up with some more options.

Someone posted in mortgage forum that Chase added a 1.25% price hit to 2nd homes today (for any consumers - price hit  means 1.25% added discount points for the same interest rate).  They are not one of our lending partners so I can not confirm that.