Rental Refinancing Scenarios and Question

[Alex Smith]

Hello everyone!

So recently I used LendingHome to fund a flip we are working on and my experience was phenomenal. I then got talking to them about rental loan products (failed to ask about fees associated with refinancing) and then started the process of refinancing 3 of our rental properties with them. I'm going to write out the details of the properties with their current notes below...

Property One:

Appraised Value: $130,000

Current Mortgage: $57,284

Current Interest Rate: 6.5% (Adjustable Rate-every 3 years)

Monthly Mortgage Payment: $425.04

Property Two:
Appraised Value: $135,000

Current Mortgage: $64,069
Current Interest Rate: 6.75% (Adjustable Rate-every 3 years)
Monthly Mortgage Payment: $461.53

Property Three:

Appraised Value: $160,000

Current Mortgage: $86,000
Current Interest Rate: 6.75%
Monthly Mortgage Payment: $527.20

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My thought was that I would refinance up to 60% LTV, get a better interest rate, have roughly the same monthly payment factoring in the lower interest rate and pull out some cash to put towards another deal.

Appraisals came back great and I calculated that I would be able to pull out about $40,000 all together between the 3 properties and still cashflow what we are currently cash flowing now. 

Now that I'm to the point in the refinance process where I need to confirm my final loan terms, I'm realizing that refinancing these properties is going to be expensive and I'm really not going to be able to pull cash out? So is it worth all this just to get the lower interest rate? I'm thinking it isn't. 

For example...

Property Two:

Appraised Value: $135,000

Current Mortgage: $64,069
Current Interest Rate: 6.75% (Adjustable Rate-every 3 years)
Monthly Mortgage Payment: $461.53

PROPERTY TWO (PROPOSED REFINANCE):

Loan Amount: $76,000

Intrest Rate: 5.13%

Monthly Mortgage Payment: $413.81

^Saving $47.72 a month, better interest rate and thought I'd get a little cash back after closing costs

Cash required at Closing:

Origination Fee: $2,000

Service Fee: $999

Pro-Rate Interest: $75.74

3rd Party Costs: TBD

Advance Payment of PITIA: $3,063.30

So after all is said and done, I really won't be getting any cash back....

Thoughts? What would you do? I feel bad backing out of all 3 now as everyones been working on it and it's my fault for not asking for these fees up front I just honestly did not think it would be this much or that they'd want 3 months PITIA in advance (Which is fine...I'd just cashflow more for 3 months) but I'm not feeling good about this....

[Alex Bekeza]

@Account Closed Does Conventus offer $76,000 loans for less than $2k origination?  It's hard enough to find someone willing to go below $100k and I've found most of these nationwide commercial lenders (like a lending one) are dealing with way too much volume as is to bend on fees for loans scraping the minimum.  (just my experience).  

@Alex Smith Why not just take these loans up to 75% LTV? I agree that the transactional fees likely make no sense just to lower the rate but in this environment you can easily drop into the 4s AND pull 75% cash out with commercial/non qm products.  (perhaps lending one is not the best fit for your rentals, they seem more competitive on flips).