What would Shakespeare do: To refi or not to refi?

[Sean H.]

Hey BP community,

So that is the question, should I look to refinance a property during these historically low rates? I have Midwest property that is less than $100k but the current loan has a 5% interest rate. With rates in or below 4%, seems like a great idea until looking at the numbers.

Assuming it cost around $3000 to refinance, even getting a new loan at less than 4% it will take 5+ years to make that money back.

Based on these numbers, it does not appear to be a good idea to refinance...but figured I should ask the experts and see what other strategies people are using for Midwest investments that are less than $100k.  Instead of a refinance, are people taking money out through HELOCs or other type of home loans?

[Paul Defngin]

Originally posted by @Lynn McGeein:

Just wanted to add that investment property refi does not have the same protections as owner-occupant -- we found out in 2012 at a refi closing.  Our costs were raised substantially due to remote closing, where out-of-state attorney charged us plus attorney we used for closing  charged as well, didn't disclose extra costs until closing.  Plus they said all attorney fees would be charged even if we walked away as this wasn't an owner-occupied loan so we'd still be responsible for them.  Our rate was over 6%, so getting it to 4.25% was helpful, but I wouldn't have done it if they disclosed all costs upfront.  There was no additional charges for our remote closing on owner-occupied, where they even sent an attorney to our house with no additional costs that same year. So we definitely weren't expecting those extra costs on the investment refi. 

Wow. I’m sorry that you had to go through that.