"Cheap Money"...to refi or not, that is the question.

[Todd Handriegh]

So I screwed up last year, or at least according to my current strategy.  I refi'd my 30yr mortgage on rental property down to a 15yr, and paid points to get down to 3.5% interest.

Now I'm wishing I pulled cash out so I could put it to use sometime in the near future, especially if the market corrects...but even if it doesn't, having capital is never a bad thing.

Now rates are finally bouncing, which are causing valuations to pull back.  Great timing - NOT.

Anyway, I decided to get ahold of my lender and they are going to give me a break on closing costs, as much as they can really...most of it is not really avoidable.  Looking at about $4k to refi again.  This will actually worsen my interest rate from 3.5% to 4.5%, and increase the term of my loan from 15 years to 30 years.  While initially it was looking like I was going to be able to cash out $35k, a lower than expected appraisal is now going to only allow me to cash out $17k (OUCH).  

 I will go from paying about $40k in interest over 15 years, to $95k in interest over 30 years.  My monthly cashflow will improve by about $150/mo.  

I immediately felt sour about the whole idea.  However, I still ending up talking myself into moving forward.  I mean...at the end of the day, isn't this all about cashflow and liquidity for expansion?  Even if I just took that $17k and stashed it in the S&P500 index for the next 30 years and never bought another rental, at an annual 8% return I'd make $170k, more than covering the additional interest paid.  

Cheap money is cheap money.  Even though it's not much cheap money as I would have liked to have.

And the upfront cost of closing will be significantly offset by pushing back a mortgage payment.

Any advice on whether this still makes sense to pull the trigger is appreciated.  Otherwise I just lose the cost of the appraisal and application fee.

Thanks as always, BP community!