Should I refi my primary before refinancing my investment?

[Gerard Scranton]

Hello BP fam! I'm having trouble with the decision of refinancing my primary property before starting the process of rehab/refi for my investment property. My concern is that my DTI may be negatively effected if I refi my primary 1st. Or at least that's my mindset. This refi will definitely increase my mortgage payments but it will also absorb a HELOC which will put a stop to I/O payments. (HELOC was tended for investing but went bad and now just paying interest for nothing. A REI mistake I'm trying to recover from)

This will be my actual 1st property.  I inherited it from my mother-in-law. 

Balance: $26K  2/1 990 sqft 0.5 acre. 

Value as of 11/22: $105K (appraisal)

My goal is to pull cash out to rehab. In it's current state, there is $80K in equity. With an updated appraisal, I'm sure there's more equity available. 

Any advice as to what to takle first would be greatly appreciated. 

[Dustin Tucker]

For your investment property loans, if they are done in an LLC, most of them don't report to your personal FICO Score, however you can ask the lender before you get a loan to verify. If you go through a bank or traditional lender, they will report your mortgage, but at this point the DSCR rates are as good or better than the traditional mortgage rates, and the LTV are the same. If I were you I would want to wait, 3-6 months to refinance my primary, as its a given that the interest rates will be lower in 6 months.

Depending on your interest rates from your 1st mortgage and 2nd heloc, you can turn your Heloc into an amortizing loan by making payments on it every month.  I don't know if you have a yearly renewal, or if your Heloc is for several years. You might add the weighted interest you are currently paying, to see if you actually save money by refinancing your primary.

For your 1st investment property, if you want to do a cash out Refinance on a DSCR type loan, you will need to get a minimum loan of $70,000, at 6.6%, you would need to have the property rented for a minimum of $900/mo, assuming taxes are about $2k/year, and Insurance is $750/yr. If the property is not rented you can get a fix and hold or a bridge loan to complete the repairs, these loans are DTI sensitive.

A couple things to do.

1. Make sure you have an LLC set up to put your investment property into the LLC.

2. Only have members on your LLC with good credit 680 and above, you can use a will to plan for unexpected circumstances.