Newbie: Should I REFI OR NOT

[Tonye Jack]

Hello, 

I have a property I purchased for $97,500, with an original appraisal of $100,000. My mortgage payment including (Principal, Taxes and Insurance) is $477. I paid a 20% down payment bringing the mortgage to $77K, I've also completed a rehab putting in an additional $20k into the property. All in cash between down payment and rehab brings me to $42,000. My question is should I refinance at a 75%LTV, my estimated ARV is between $125K - $140k. If I complete the REFI I potentially only get $13K with a Mortgage payment increase to $508 Or hold the equity in the property?

[Kevin Sobilo]

@Tonye Jack, that is a very good question. I think the answer is less about the numbers you mentioned, although those are important, but MORE about what your future plans are.

If you don't have any plans to use that $13k in the near future then you are just paying interest on money sitting idle. However, if you have intentions of doing something like purchasing another property next year then that $13k will be put to good use and the larger loan amount and added interest is well worth it.

The numbers you talked about are also factors because the more you can pull out the more you can do with it. Also, interest rates are very low now, so it would be nice to have access to that money.

You could also look at a line of credit. That would give you access to that equity if you need to without having to pay interest if you aren't using it. I have a line of credit that I use as reserve funds in case of a big emergency or to jump on an unexpected opportunity.