Should I recast my mortgage loan?

[Brandon Arnett]

Hello,

I have a few rentals and need some input. 

I have one property that I bought last year for $475k

Current value is $520k

Interest rate 6.75%
loan amount is $352,000 (I put 25% down when I bought it)

Monthly P/I escrow is $2680

Rents for $2400

im debating putting 100k on the loan and recasting it. this will lower the payment roughly $650 a month and will make it cash flow. What do you think?

[Chris John]

@Brandon Arnett

You've got some great answers, but you're thinking about losing $100k in liquidity for a delta of around $2760 a year or $230 a month.  I'd really, really think about that.

@Elias Halvorson hit the nail on the head.  Park the $100k at 5% until you find something better to do with it.  That'll give you around $420/mo instead of the $650/mo in savings, but:

- You'll have liquidity in case you find something better to do with the money

- You'll have the ability to refinance at a potentially lower rate in the future as @John Mason points out.

- You won't extend the term back to 30 years (which is definitely part of your monthly projected savings).  The delta on the 6.75% and 5% is actually only $145/mo.  The other $85 of monthly savings must be coming from extending the term.

- You won't have to pay all of the fees associated with a new loan.

I'd think long and hard before I buried $100k like that.  Heck, you can get a decent rental in many parts of the country with that much (either as a down payment or just paying cash) that would most likely yield you more than $650/mo. 

Good luck with whatever you decide.