FHA Refinance Question (CA)

[Kyle Mendez]

Hey BP -

I'm new to investing and can't quite grasp when a good time to refinance is, so bear with me..

I purchased my first and only property 2 years ago with an FHA loan and have a question about refinancing.

Details:

Purchase Price: $256,000

Financed: $246,489

Interest rate: 3.25%

Term: 30yrs

Current balance: $233,138

*Zillow estimate: $297,000 - $300,000

Based on the details listed above, would it make sense to refinance with today's interest rates or would I have to find a lower interest rate? What are the advantages and/or disadvantages based on my circumstance?

My intention would be to either find another investment property (likely out of state) or possibly use the cash to finance a property in Germany, where I may be moving with my fiancé (still researching investments/laws/regulations in Germany).

Any advice is much appreciated.

Regards,

Kyle

[Chris Mason]

Originally posted by @Kyle Mendez:

Hey BP -

I'm new to investing and can't quite grasp when a good time to refinance is, so bear with me..

I purchased my first and only property 2 years ago with an FHA loan and have a question about refinancing.

Details:

Purchase Price: $256,000

Financed: $246,489

Interest rate: 3.25%

Term: 30yrs

Current balance: $233,138

*Zillow estimate: $297,000 - $300,000

Based on the details listed above, would it make sense to refinance with today's interest rates or would I have to find a lower interest rate? What are the advantages and/or disadvantages based on my circumstance?

My intention would be to either find another investment property (likely out of state) or possibly use the cash to finance a property in Germany, where I may be moving with my fiancé (still researching investments/laws/regulations in Germany).

Any advice is much appreciated.

Regards,

Kyle

FHA's mortgage insurance will have been at 0.85% for that scenario two years ago, if memory serves correctly. And it's mortgage insurance that never drops off.

So your real interest rate isn't 3.25%, it's 3.25% + 0.85% = 4.1%. Historically, you did that math and it always made sense to refinance. 

Today, however, 4.1% is a dead sexy interest rate and it wouldn't make sense if that were your sole motivation. 

What is the value of the home today, who lives in the home, and what is the unit count? That'll let us know if you have enough equity to do a cash out refinance.