Should I refi now or wait until spring of next year??

[Aaron Gallington]

I have started going down the road to do a DSCR cash out refi on a duplex (BRRR) I purchased last year with my HELOC, but not that far yet. I know rates have dropped a decent amount in the last week or 2, but based on what i am seeing/hearing about rates likely to continue dropping, wondering if i should hold out?? I don't need to refi now. Property is cash flowing well under my HELOC, and I don't really need my money back from my HELOC until next year when i will buy another property. Any thoughts?? property is worth 400K and i am doing a 75% LTV cash out. 1.6 DSCR. I am getting quotes in the mid 6% range now with about 12K in closing costs (not including escrow), and no PPP. Closing costs include all typical including title and appraisal. I also have no issue getting conventional financing, but am going DSCR in order to get up to the 75% LTV.

I don't think i really need any more quotes at this time, that is not why i am posting this, just wanted to get other's thoughts.....

[Owen Dashner]

I'd wait if you don't need the money back now.  The market is pretty confident the Fed is going to lower rates at least .75% before 2024 ends, which will spill over into mortgage rates.

Side note: Your closing costs seem crazy high for a refi. You should be able to shop local lenders and credit unions and get a much lower amount of cash out of pocket while still achieving your goal of 75% or even 80% LTV on a commercial note.

[Caleb Brown]

It doesn't hurt to wait. If the rates were uncertain I'd say now but they are planning to drop them, just not sure how much. I would speak to a few lenders, the CC seem high 

[Erik Estrada]

Quote from @Aaron Gallington:

I have started going down the road to do a DSCR cash out refi on a duplex (BRRR) I purchased last year with my HELOC, but not that far yet. I know rates have dropped a decent amount in the last week or 2, but based on what i am seeing/hearing about rates likely to continue dropping, wondering if i should hold out?? I don't need to refi now. Property is cash flowing well under my HELOC, and I don't really need my money back from my HELOC until next year when i will buy another property. Any thoughts?? property is worth 400K and i am doing a 75% LTV cash out. 1.6 DSCR. I am getting quotes in the mid 6% range now with about 12K in closing costs (not including escrow), and no PPP. Closing costs include all typical including title and appraisal. I also have no issue getting conventional financing, but am going DSCR in order to get up to the 75% LTV.

I don't think i really need any more quotes at this time, that is not why i am posting this, just wanted to get other's thoughts.....

Who's quoting you mid 6s with no PPP at 75 LTV? That's a very very good term

[Aaron Gallington]

If i do wait, do DSCR rates typically/generally move down when fed rates lower like a conventional rate does? Not too familiar with DSCR.

[Donna Rundo]

Since rates might keep dropping and you don’t need the funds immediately, it could be smart to wait. If you decide to move forward with a cash-out refi later, I can help with that. Just let me know!

[Devin Peterson]

Another 50bps just announced today so give it a month or two that will improve ... advise if you are not in a rush

[Aaron Gallington]

does anyone know of a conventional financing institution that offers 75% LTV cash out refi on a duplex? Most go by Fannie/Freddy guidelines which is max 70% LTV

[Daniel Baccarini II]

Quote from @Aaron Gallington:

If i do wait, do DSCR rates typically/generally move down when fed rates lower like a conventional rate does? Not too familiar with DSCR.

Rates will drop but it's not directly correlated to what the Fed funds rate is. If you want to track what DSCR rates are doing, I would follow the US Treasury yields specifically for the 5 and 10-year treasury. If you aren't in a hurry, you can afford to wait a little bit longer.

A few other responses mentioned that your closing costs are a little high. Are you paying more in origination costs in exchange for not having a prepayment penalty?

[Dave Skow]

@Aaron Gallington- thanks ...if you dont need to complete the refinance now - I would wait for a little bit ....you might get fully approved for the new loan with a lender to make sure you are able to get the loan but hold off on locking a rate and completing the loan until rates drop a bit more ...if you are able to obtain conv financing - go this route as 75% ltv should be available and rates / fees should be much better than a DSCR program - thanks

[Timothy Hero]

I'm a mortgage broker for DSCR loans, so maybe I'm biased, but I hate when the market blesses us with a 200 bps rate decrease in 6 months and folks want a larger blessing.

Keep in mind, just 12 months, 8% was the average DSCR rate. Now I'm quoting 6.2 - 6.4% on average.

Take the blessing. Get a reduced prepay in case the market does goes lower to protect yourself.

[Aaron Gallington]

Agree with you 100%. I am getting quoted 6.5% now and am ok with that, but closing costs just seem high. This is what i have for closing costs. i think the only thing i can actually save on is the "discount fee". I am not including escrow for insurance or taxes.

- discount fee- 6,705

- underwriting fee- 1,495

- tax certificate and flood cert fee- 77

- capitol review- 165

- investor review- 400

- CR fee- 160

- VOE fee- 75

- Appraisal- 1495 (I know this seems high, but i have had multiple quotes)

- Title company charges- 2,100 (I have a quote)

[Daniel Baccarini II]

Some lenders require you to pay points at closing to buyout the prepay but haven't heard that referred to as a "discount fee" before. Did they send you a quote with a prepay that didn't have the discount fee?

The appraisal cost seems really high, but is the property in an area that doesn't have very many appraisers locally?

[Erik Estrada]

Quote from @Aaron Gallington:

Agree with you 100%. I am getting quoted 6.5% now and am ok with that, but closing costs just seem high. This is what i have for closing costs. i think the only thing i can actually save on is the "discount fee". I am not including escrow for insurance or taxes.

- discount fee- 6,705

- underwriting fee- 1,495

- tax certificate and flood cert fee- 77

- capitol review- 165

- investor review- 400

- CR fee- 160

- VOE fee- 75

- Appraisal- 1495 (I know this seems high, but i have had multiple quotes)

- Title company charges- 2,100 (I have a quote)

 Discount fee is just a rate buy down. You will see the savings if you hold the loan long term and do a cost benefit analysis. Otherwise you are just paying more for a loan if you are not keeping it long enough.