Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Private Lending & Conventional Mortgage Advice
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 4 years ago on . Most recent reply

User Stats

50
Posts
32
Votes
Mary Baccellieri
  • Bronx, NY
32
Votes |
50
Posts

HELP - What should I do? Refi now or later?

Mary Baccellieri
  • Bronx, NY
Posted

Hi everyone,

I am not sure what I should do here- refinance now or later?

The scenario:

I bought a 4-unit property in 2019 with an FHA mortgage that I have been house hacking. I did an FHA streamline last year and was able to reduce my monthly payments by nearly $900. Now I am contemplating doing a refinance into a conventional mortgage but I need 85% loan to value to do so. My appraisal came back at $850k and I owe ~$740k on the loan. This means I will have to pay ~$17k out of pocket to pay down the mortgage to get to 15% equity. My closing costs are $21.5k. Is it worth paying $38.5k out of pocket to save $600/month on PMI?

Other benefits of a refinance now:

-Can refinance while interest rates are low (being offered 2.99%)

-Can refinance while I still live in the property (plan on moving within a year and owner occupied rates are lower)

-Can remove my partner's name off the mortgage and make him eligible for an FHA loan in the future (to buy another 2-4 family with 3.5% down)

-17k mortgage pay down is technically money in my own pocket

-I will get a tax break on some of the closing costs paid

My thought process is that eventually I have to refinance out of my FHA mortgage to go conventional to get rid of PMI (even if I was at 80% LTV). Should I do it now to free up the option for another FHA mortgage with my partner while also reducing my monthly costs aka increasing my cash flow?

Any thoughts/tips/advice?



Most Popular Reply

User Stats

50
Posts
32
Votes
Mary Baccellieri
  • Bronx, NY
32
Votes |
50
Posts
Mary Baccellieri
  • Bronx, NY
Replied

Hey @Brad Sneckner - thanks so much for your response. This is definitely a property I plan on keeping for 30 years or maybe until the return on equity falls below 9%/8% but I have a long way to go until that point so I am definitely playing the long game here. I agree, the closing costs are ridiculously high but I think because it's a special case scenario like you mentioned and because my loan balance is still very high. I know that I can write off a portion of it for my tax return so I've decided I will bite the bullet on that. I was hoping my appraisal would come in at least $870k to get to that 85% LTV and not have to worry about paying down the mortgage at all. If that were the case, I would be more a bit more gung-ho about moving forward but now that I have to do this principal pay down, it has me doing a much deeper analysis to make sure this still makes sense. I think I'm leaning towards moving forward with it especially because I would like to free up the opportunity to use an FHA mortgage again to buy another 2-4 unit property with as little money out of pocket as possible.

Loading replies...