Refinance advice - with numbers

[William Walker]

So I am think about refinancing a current SFH rental property. I have been discussing it with my mortgage company and they gave me full numbers, I'm just not 100% sold on it.

I bought the property in 2015 for $134,000 and put 20% down.  Original loan was for $107,000, I currently owe $96,200.  Current interest rate is 4.25% and it's a 30 year fixed.

Prices in the area have gone up considerably, a house 2 doors down from me with the same sq. ft., not as nice inside and no garage sold within the past month for $187,000 after it was listed for $185,000.  Zestimate for my property says $180,000, I'd like to think closer to $190,00.

The mortgage company is offering me an interest rate of 4.875% (since it's an investment property and not a primary residence) for a 30 year fixed.  They have plugged in $180,000 as the value based on Zillow (don't get me started) and have put estimated closing costs at $3,342.

My new monthly payment would be $880 compared to $680 current payment.  They are giving me 75% of the value (75% of $180,000) so a total of $135,000.  After escrow and closing costs I would get $33,903 back. 

I have some credit card debt that needs to be paid off which is what I would use the money for.  Current interest rate on credit card is $20,000 at 12%, $3,300 at 13%, and $2,700 at 11%. 

The house currently rents for $1,350 so I'm ok with the increase in mortgage from $680 to $880.  Biggest question is should I jump now while home values are high, or just continue riding what I have.  Any advice is appreciated and let me know if you have any questions!  Thanks!

[Shaun Weekes]

Originally posted by @William Walker:

So I am think about refinancing a current SFH rental property. I have been discussing it with my mortgage company and they gave me full numbers, I'm just not 100% sold on it.

I bought the property in 2015 for $134,000 and put 20% down.  Original loan was for $107,000, I currently owe $96,200.  Current interest rate is 4.25% and it's a 30 year fixed.

Prices in the area have gone up considerably, a house 2 doors down from me with the same sq. ft., not as nice inside and no garage sold within the past month for $187,000 after it was listed for $185,000.  Zestimate for my property says $180,000, I'd like to think closer to $190,00.

The mortgage company is offering me an interest rate of 4.875% (since it's an investment property and not a primary residence) for a 30 year fixed.  They have plugged in $180,000 as the value based on Zillow (don't get me started) and have put estimated closing costs at $3,342.

My new monthly payment would be $880 compared to $680 current payment.  They are giving me 75% of the value (75% of $180,000) so a total of $135,000.  After escrow and closing costs I would get $33,903 back. 

I have some credit card debt that needs to be paid off which is what I would use the money for.  Current interest rate on credit card is $20,000 at 12%, $3,300 at 13%, and $2,700 at 11%. 

The house currently rents for $1,350 so I'm ok with the increase in mortgage from $680 to $880.  Biggest question is should I jump now while home values are high, or just continue riding what I have.  Any advice is appreciated and let me know if you have any questions!  Thanks!

You're still cash flowing

Paying off a lot bad debt

Your rate is good

This is a good decision in my opinion.  As long as the lender isn't charging you points directly you're good to go.