Future BRRRR REFI question

[Brandon Cain]

Hey guys, I'm currently looking to BRRRR some properties and hold onto them as rentals. With rising interest rates, I'm worried about the refinance and what implications it may have on cash flow. Obviously with higher rates, cash flow will be reduced. Do you think interest rates will decrease when inventory starts to come up? If I pull cash out via refinance into a high interest rate, say 7%, can I rate and term refinance later on when interest rates go back down?

[Andrew Garcia]

Hi @Brandon Cain, first, interest rates and housing inventory are independent variables. The amount of housing does not affect the interest rate environment.

If we were to have a recession, rates would likely go down. Otherwise, the Fed is likely to continue hiking rates to combat inflation.

You can do a rate and term refinance once rates go down. However, depending on the product, you might have a pre-payment penalty.

In that case, you would have to pay 1-5% of the loan amount as a fee for paying the loan off early.

Be sure to take this into consideration when doing the cash-out refi.

Hope this helps! Let me know if I can be of any assistance.