Author Topic: Refi vs Lump Sum payment  (Read 790 times)

GoldenCoStache

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Refi vs Lump Sum payment
« on: April 12, 2018, 12:59:58 PM »
Yes i will use the search, but in the interest of efficiency and real time conversation.....


 I have a rental property and mortgage with a 5% rate and PMI (ouch, I know)

I would like to refi in order to drop the PMI and get paid off in 15yrs vs my current 22+yrs left.

The closing costs are north of $7500 which puts the interest savings in the end at ~$22k
 
With a lump sum of $15,000 I can do better on the interest savings, I am at a ratio that allows me to drop the PMI lowering my payment, and will save 4years of term.

To get to 15years,  I am $27k out of pocket with >$40k interest savings.  This is the equivalent $150 month for the 15years which is less than what the refi bill would be


Is there something I am missing? Is there any reason to Refi? Ever?  I do understand adding years if youre having trouble paying bills...But we're  Mustachian right? ;)

Tax Implications maybe?



Cheers and thanks

waltworks

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Re: Refi vs Lump Sum payment
« Reply #1 on: April 12, 2018, 04:10:34 PM »
That is a VERY expensive refi. Why on earth are the closing costs so high? Are we talking a multimillion dollar property?

-W

GoldenCoStache

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Re: Refi vs Lump Sum payment
« Reply #2 on: April 13, 2018, 02:31:18 PM »
Ive only checked with 2 lenders...My current servicer and the local CU..They were identical.  It is an investment home/rental.

waltworks

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Re: Refi vs Lump Sum payment
« Reply #3 on: April 13, 2018, 06:03:51 PM »
Go online and get quotes (Zillow has an easy quote-getting feature). You should be able to get those costs WAY down quite easily.

-W

Another Reader

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Re: Refi vs Lump Sum payment
« Reply #4 on: April 13, 2018, 06:50:00 PM »
What's the interest rate on the new mortgage?  I would bet it's five percent or higher for a 30 year fixed on an investment property and in the mid-high 4's for 15 years.  In your shoes, I would probably make the lump sum payment that would get me out of PMI and just make the existing loan payments.

BTW, you haven't given us enough information to determine if the fees are reasonable.  Loan amount?  Property type? Credit score?  Property value?  $100k property? Unreasonable. $1MM property?  Sounds good to me.

I almost always agree with Waltworks, but not on using Zillow to get quotes.  They act as a lead aggregator and you will get every low life mortgage broker in the country calling you within 10 minutes of submitting your information.  Ask around for referrals from other investors and a couple of agents you like.  Benchmark low rates and fees using Aimloan.com.

GoldenCoStache

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Re: Refi vs Lump Sum payment
« Reply #5 on: April 14, 2018, 01:16:59 PM »
Rental property, 800= credit, property worth 2x+ the loan
original = $150k Now $122k
30 yr loan of which there is 22 left
 Quoted $15year $7500 cost, 4.25%

Ive been pushing this off for awhile now and each time I do the math,  It shows that I am at least just as well keeping my low payment and putting extra to the principle.

Unless your hard up or rates have dropped dramatically, I dont get the math of Refi

Another Reader

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Re: Refi vs Lump Sum payment
« Reply #6 on: April 14, 2018, 03:09:59 PM »
Rental property, 800= credit, property worth 2x+ the loan
original = $150k Now $122k
30 yr loan of which there is 22 left
 Quoted $15year $7500 cost, 4.25%

Ive been pushing this off for awhile now and each time I do the math,  It shows that I am at least just as well keeping my low payment and putting extra to the principle.

Unless your hard up or rates have dropped dramatically, I dont get the math of Refi

Not at today's rates.  Part of that $7,500 is probably going to buying down the rate.  A rental property is considered riskier and there is an interest rate adjustment for that.  I would just pay down the principal and drop the PMI.

GoldenCoStache

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Re: Refi vs Lump Sum payment
« Reply #7 on: April 15, 2018, 06:44:58 AM »
yes! Good catch! It is buying down points.   Thank you.

I will pay it down to achieve the 78% on the first and then go from there.


Cheers and thanks!