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Updated over 7 years ago,
Refi on multi-unit, shorter term with lower rate worth the risk?
We just found out we qualified for a 15 year refi @4 % on a 2 unit property (it's actually 3 units but it's on the records as 2). The monthly payment would be almost exactly what the rents bring in. So any repairs, any vacancies, etc will be out of pocket...until we raise the rents. Our rents are under market value by about 20-25% so we have room to raise them over time. However, it feels a little risky because the rental market could tank and we may not have much of a cushion. Another option is to go with a 20 year loan which will lower the payment by approx $500/month. We could keep our plan of paying on the 15 year schedule unless something catastrophic happens (rents tank). The trade-off is that the loan would be at 4.4%. So we end up paying a lot more interest over time.
We live in, and the property is in the california bay area, so we are talking about a large chunk of money.
What would you do?