To refinance owner occupied Mutli-family? Or not to? BRRRR

[Nicholas Armstrong]

Hello everyone! 

I would like your thoughts on something that I have been thinking about recently

I have purchased a duplex that I will be occupying. My plan is to update both units, rent and refinance to purchase another property later this year. BRRRR.

Here's my question:

Since I'm getting a low interest owner occupied loan to purchase this duplex, does it make sense to cash out refinance after a year?  Or should I just keep the current low interest loan I have? On the BP podcasts I've heard Brandon talk about the advantages of having an owner occupied loan on a multi-family property so I want to make sure I'm making the correct decision.

Any thoughts on this subject would be greatly appreciated! Thanks!

[Arianne L.]

@Nicholas Armstrong Congratulations on your purchase!

It depends on what your current loan terms are (interest rate, are you paying PMI?) compared to loan terms available in the future, and how much equity you'll have in the property after a year. Typically, owner occupant loans and investor loans vary by .5%. If that was still the case a year from now, I wouldn't bother refinancing if it was just from a cashflow perspective. If you are currently paying PMI, then refinancing so that you don't have to pay PMI will increase your cashflow.

If you used a 203k loan, you would want to refi out of that as soon as you can since interest rates are higher.

With regards to refinancing to get cash out, it depends on how much equity you can convert into cash. You have to weigh it and see if the extra costs incurred by refinancing outweigh having the cash in hand.