FIXED vs ADJUSTABLE mortgage for first property invesment.
Guys, need some help evaluating my potential first property!
As of now, the owner has agreed to settle on a purchase price of 52K. Now, I am trying evaluate the best way to finance. I am talking to two separate banks and here is what they have offered:
OPTION 1: allowing a minimum of 15% down (because it's an "investment property") at 6.125% interest on a 30 year fixed mortgage.
Total Cash Needed: 13,800 (including 4k in repair estimates)
Cash Flow: $245 at
21% COC ROI
OPTION 2: allowing 10% down on a two year adjustable rate mortgage, 30 year term starting at 4.5% for those first two years subject to change:
"Your interest rate can change every 2 years"
"Your interest rate cannot inc or dec more than 8% over the term of the loan
"Your rate cannot inc or dec more than 1.0% at each adjustment.
At 4.5% with 10% down:
Cash Flow =$291; COC ROI: 27%
At the potential 8% cap
Cash Flow = 188$
So my question is which option would you choose? Also, would it be feasible to go with the adjustable rate and then potentially REFI 3-5 years down the road pending interest rate hikes? Thanks for the advice!