Refinancing affect credit

[Kiara Crespo]

Does using the BRRRR method affect your credit score? I saw online that refinancing can damage your score. Is this true?

[Todd Rasmussen]

Originally posted by @Kiara Crespo:

@Todd Rasmussen what do you mean what kind of margin? Sorry super new to this. Thank you. 

 No worries,

I'm using it to describe the difference between how much you are bringing in and how much the property is costing you.

More specifically, the lenders I have will only allow 75% of actual rental income to be considered when they are underwriting the loan so:

Lets say you have a $850 a month rental that cash flows $192 a month after your expenses.

You look at that and see a property that is lowering your debt to income ratio because it is increasing the amount of income you have over the cost of your debt to the tune of $192 a month. A bank might only consider your rental income at $637.50 a month, leaving you in the hole by $20.50 every month.

In this example your investment property will actually lower the amount you can borrow on your next investment by whatever principal equates to a $20.50 monthly payment. If you set up your first deal with sufficient margin, a lender would look at your rental property as positive cash flow and it would help instead of hurt your next loan application.