My rental property is significantly underwater (~200% LTV) and the loan is owned by Freddie Mac; therefore, I have very limited options for refinancing under HARP2. Unfortunately my current lender Wells Fargo won't allow me to refinance directly with them because of the servicing company that I'm with (not that I had a choice in that regard, but whatever ... I've already inquired twice--at separate intervals--and I've been told the same thing both times ... I think it's a stupid rule but I don't want to deal with fighting against it).
I started the refinancing process through a different company but now I'm wondering if it really even makes sense. I don't know if any calculators exist for scenarios like this ... so I'd like to know what my fellow Mustachians think.
Background:
Age 32. Single with no dependents. South Florida. Primary residence is owned outright (mortgage paid off last year). Approximately $140k in retirement accounts consisting of HSA, Roth IRA, and 401k (combination of both Roth & Traditional). Recently started to max out all three which doesn't leave much wiggle room on $50k-$55k gross annual salary (depending on overtime, bonuses, etc.). Goal retirement date is 2020.
Investment Property (condo):
$602.55 Mortgage (6%) ... current balance ~$90,000 ... original amount $100,500 for 30 years (already 5 years in)
$236.57 HOA (includes water/sewer, trash, etc.)
$100.00 Electric (variable but capped per lease, conservatively budgeted although typically less)
$100.00 Property Tax (flexible reserves/escrow/sinking fund)
$ 3.00 Electronic Rent Collection Service
$800.00 Gross Rental Income
I try to infuse about $200 per month into the designated bank account that I use for the rental property. This covers the excess monthly expenses but doesn't put anything aside for maintenance/upkeep/repairs/upgrades/vacancy. My goal with the refinance would be to become approximately breakeven (to neutralize my currently negative cash flow). Right now I've locked 3.75% with 2 points ... so it will cost me at least $6k-$7k to get my mortgage payment down to $416.80 ... and then on top of that they're requiring me to escrow taxes through them along with getting insurance of $18k on the property (which I haven't felt overly compelled to get because the main structure is covered under the master policy meaning that I'm only responsible for the interior walls and contents so I've been self-insuring up to this point). If I do the refinance, I would let the mortgage run its course for the full 30-year term but I wouldn't have as much of a loss to write off on my taxes so I might have to change my federal withholding from S/4 to S/3 on my bi-weekly paycheck. If I don't do the refinance, I would probably end up attempting an early payoff in one form or another ... either by gradually infusing money from my own pocket or from eventually buying another rental property (cash flow positive) and applying those profits against the mortgage balance on the loser property.
Should I move forward with the refinance? I feel like it's basically now or never. Would I get more of a benefit by plopping that extra $6k-$7k down as extra principal payment instead, and then focus on exterminating this final debt?