Hi Savy Inverstor(s),
I have a financial scenario that I don't know how to proceed.
My previous house is being rented now and I don't know if I should keep it being rented or to sell it.
Here is the breakdown:
House purchased for $784,000. Improvement 30,000. Total: 814,000
It was purchased in 2005. The current original loan was a 7 year ARM. The house rate today is Libor 6 months + index 2.5 Today's rate is at 3.125%. This was a 7 year interest only loan at first.
I have been paying all of these years (almost 10)
The balance is 534,000. When I bought this property I put a 210,000 down payment.
Currently the payment is $2915 + 700 taxes (monthly)+ $50 insurance. (Monthly)
The loan break down is $ 1525 principal and $1389 interest.
The problem is that the money that I collect from rent is only $2900. For taxes and insurance, I need to pay from my own paycheck every month.
What should I do? Keep house with same ARM? Refinance? sell?
The ARM loan is a 6 months Libor. With a Max increase cap of 1% a year.
The current loan balance is 533,000. We think with the current market improvement we can get around 700,000. ( minus sales commission. we hope)
We have a great tenant for about 1 1/5 year with a lease to expire in May. We haven't raised the rent since it has been rented in 2013.
A few things about this property Northern California
I put 210,000 down payment
30,000 improvements. To finish backyard, fan, stainless appliance.
$2,400 x 12x 8 years ( interest only loan)
House is currently rented. Rent $2,900
I manage myself the property. And I have fixed so far the washer machine (bad switch) and garbage disposal (replaced $80). I feel lucky that I could do the work myself. House was built in 2005 so it is pretty new.
Currently I am required to send to bank $2915 month
Insurance ($550) and taxes ($7000 which includes Mel Roose fee). I pay annually .
The loan balance is going down. Would it be a good reason to hold on with this property? The Zillow estimates an annual increase of 7% property values.
My concern is that the loan is an ARM and payment can go higher eventually. Current at 3.125% ARM (Libor + index 2.75)
The positive thing is that more than half of my mortgage payment goes to principal. $1525 principal and $1389 interest.
I am not sure if the cost of refinance this property is worthy. I expect higher APR rate because it is a rental unit.
Thanks for any feedback that I can get from this discussion group. Regards,
