Refinance options for my 3 - family in Chelsea, MA

Rental Property Investor · Chelsea, MA · Member since 2017 · 22 posts · 2 votes

Not happy with my current Mortgage broker, he waited too long and gave me the runaround about cash out refinancing then left me hanging as interest rates started to rocket up. I've got a 3 family in Chelsea, MA with about 25% equity, my DTI is under 50%, I have an FHA loan and I want to free it up so I can use it in the near future again, so I want to get into a commercial loan. Need to understand if this is still worth it or even possible at current rates...my interest rate is 2.875 % so even if I get a commercial loan and stop paying mortgage insurance I'll likely need to still pay more a month than what I'm paying now, but may be worth it to free up the FHA loan for future purchases. Would love to talk to someone knowledgeable about investing and go over options with me. Any recommends?

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Paul Crosby II

Lender · Columbus · Member since 2020 · 61 posts · 103 votes

Hey Jared! I would agree with you as i was in the same boat with a single family that i bought FHA at a 2.875. I believe you mean a conventional loan instead of commerical but im not sure.

I would definitely suggest freeing up the FHA loan because while the low interest rate is nice, your effective interest rate is much higher with the MIP.

Usually the extra cash you can get by using the loan for a new property far outweighs the cost of a couple hundred on the int rate plus if you time the refinance properly you can squeeze up to 2 months without making mortgage payments.

Hope that helps!

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
4y
Hey @Jared K. so if I am understanding correctly, you would like to refinance from an FHA to a commercial loan? This could make sense if the total monthly payment on the commercial loan are lower than the FHA loan.
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Lien VuongBusiness Member
Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
4y
I'm so sorry to hear and I have definitely gone through a similar experience myself. There are still some programs that are worth it especially if you have that amount of equity. Have you spoken with a local CU to do the refi? They'll let you do it up to 100% of your equity and you can tap into those funds to invest in the next asset. Going with a commercial refi would give you the best LTV programs out there.
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Jared K.
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Rental Property Investor · Chelsea, MA · Member since 2017 · 22 posts · 2 votes
4y
Quote from @Lien Vuong:

I'm so sorry to hear and I have definitely gone through a similar experience myself. There are still some programs that are worth it especially if you have that amount of equity. Have you spoken with a local CU to do the refi? They'll let you do it up to 100% of your equity and you can tap into those funds to invest in the next asset. Going with a commercial refi would give you the best LTV programs out there.

Thanks for the tip, I have not but have one in mind I'll reach out.
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Jared K.
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Rental Property Investor · Chelsea, MA · Member since 2017 · 22 posts · 2 votes
4y
Quote from @Erik Estrada:

Hey @Jared K. so if I am understanding correctly, you would like to refinance from an FHA to a commercial loan? This could make sense if the total monthly payment on the commercial loan are lower than the FHA loan.

Yes exactly, when I look at the numbers it's likely going to be a couple hundred over what I'm paying now given my interest rate is low currently, but considering paying the extra because I think interest rates are going to continue to head up, not to mention I'd love to free up the FHA to use on the next property
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Paul Crosby II
Lender · Columbus · Member since 2020 · 61 posts · 103 votes
4y
Hey Jared! I would agree with you as i was in the same boat with a single family that i bought FHA at a 2.875. I believe you mean a conventional loan instead of commerical but im not sure.

I would definitely suggest freeing up the FHA loan because while the low interest rate is nice, your effective interest rate is much higher with the MIP.
Usually the extra cash you can get by using the loan for a new property far outweighs the cost of a couple hundred on the int rate plus if you time the refinance properly you can squeeze up to 2 months without making mortgage payments.

Hope that helps!
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Nick Riccio
Lender · Boston, MA · Member since 2018 · 171 posts · 137 votes
4y
@Jared K. I think a lot depends on your property and the #'s. at 2.875%, even with removing the MI, you're going to lose cash-flow. Also, a commercial lender is likely going to amortize your loan over 20 or 25 years instead of 30, which is another cash flow sucker. It's a delicate balance right now, but if your property can support the increased payment, and you need to use an FHA mortgage again, than it's worth it. Hope this helps
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Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
4y
Quote from @Jared K.:

Not happy with my current Mortgage broker, he waited too long and gave me the runaround about cash out refinancing then left me hanging as interest rates started to rocket up. I've got a 3 family in Chelsea, MA with about 25% equity, my DTI is under 50%, I have an FHA loan and I want to free it up so I can use it in the near future again, so I want to get into a commercial loan. Need to understand if this is still worth it or even possible at current rates...my interest rate is 2.875 % so even if I get a commercial loan and stop paying mortgage insurance I'll likely need to still pay more a month than what I'm paying now, but may be worth it to free up the FHA loan for future purchases. Would love to talk to someone knowledgeable about investing and go over options with me. Any recommends?

Hey Jared
A conventional loan would work for you if you qualify. It would free up the FHA to use again in the future and remove MI. A commercial loan won't work because I'm assuming the home is still owner occupied.
Stephanie
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