I am in the process of refinancing and the home appraised for a lot more than I anticipated. Our ultimate goal is to start acquiring rental properties and the current home would make a great one when we vacate it in a year or two. Ideally we would find a solid duplex or triplex to purchase as owner-occupied (no young kids at home) then after a year or so move to a nice single family and have 2-3 rental units working for us.
By refinancing to a conventional loan from the FHA this home was purchased with, I have been wondering if I would then qualify to purchase the next place with an FHA loan and not be required to put 20% down. This is still uncertain.
Here are the quick numbers:
Current home: ~$53K with 22 yrs left on a 30 yr term at 5.5%. PITI payment is about $525/mo.
Option 1: rate/term refi at 15 yr term 2.875% fixed. Payment goes up about $30 to about $580 (PITI). Cool. This fit well with anticipating renting the place for about $750-$800 in a year or two when we move and leaves some decent cash flow.
Option 2: cash out refi at 15 yr term 3.125% fixed and take balance up to 80% LTV. This would net us about $9,200 at closing and give us a new payment of $610 (PITI). That money would be stuffed into a taxable account or high-yield savings until we move, then used as a downpayment on a larger multifamily home. It could help us avoid PMI if the FHA route isn't a possibility.
*Currently we have about $30K in cash and anticipate the multifamily will cost $200K-$260K when we buy. We also have $65K in student loans at 6.2% and another $18K at 2.2% which we are actively paying on. I should note while many will say this is a hair on fire situation, I feel we are trying to pull the FI slingshot back now which will help accellerate everything over the next few years (case in point - If I had $65K in cash I would be more likely to buy a rental outright than pay off the high rate student loans because of the tax advantages and appreciation).
