House hack, second property

[Pamela Winslow]

Hi BP land! I purchased my first multi investment property where I lived for a year. My plan is to keep property and fully rent it out, and get into a second multi again where I would live. I need to go FHA, I know you are not allowed to have two FHA loans. My current property has a 3.5% interest rate, does it make sense to refinance and loose that rate so I am free to get a new FHA loan for my second property. Is that my only option? Any advice is appreciated! Thank you.

[Tyrek Brown]

Hey Pamela!

My personal opinion on this one would most likely be no, it doesn't make sense to refinance. 

There are a few factors that ultimately have to be considered.

First, when you refinance the property your lender will need to base the new loan on the current value of the property with LTV guidelines. That means that you will need to bring between 16.5%-21.5% of the down payment you didn't bring using FHA plus closing costs.

Second, since you will still be occupying the property FHA will require you to have a specific circumstance for purchasing the other property. These include: relocation for work, divorce, growing family, moving out of state, etc. 

Lastly, mortgage rates are much higher now than before, around 7% for residential. Will your property still cashflow with a rate that is twice as high? This is a huge increase in the mortgage payment and may make a cash flowing property quite in the negative.