Author Topic: RENTAL property refinance  (Read 1519 times)

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Offline zubs

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RENTAL property refinance
« on: July 21, 2021, 03:14:22 PM »
I have a Rental property with these stats:


Loan: $570,000 @ 3.5%
After 8 years, loan is @ $470,000.
Approximate interest paid after 8 years $146,501
Total interest to be paid after 30 years on a $570,000 loan @ 3.5% is $351,440.
So if I continue paying for 22 more years I will pay (351,440 - 146,501) $204,939 more in interest.
Monthly payment: $2,560


I looked at lenderfi and owning and they show I can refinance the rental property as follows:
Loan: $470,000 @ 3.25%
Total interest paid after 30 years on $470,000 loan @ 3.25% is $266,369.
Monthly payment: $2,045


So I can lower my monthly payment by adding 8 more years to my loan which adds another (266,369- 204,939) $61,430 in interest expense.


Is my math right?  Would you refinance and put the extra $500/month into the stock market?


« Last Edit: July 21, 2021, 03:23:48 PM by zubs »

Offline USCTrojanCPA

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Re: RENTAL property refinance
« Reply #1 on: July 21, 2021, 03:29:19 PM »
I have a Rental property with these stats:


Loan: $570,000 @ 3.5%
After 8 years, loan is @ $470,000.
Approximate interest paid after 8 years $146,501
Total interest to be paid after 30 years on a $570,000 loan @ 3.5% is $351,440.
So if I continue paying for 22 more years I will pay (351,440 - 146,501) $204,939 more in interest.
Monthly payment: $2,560


I looked at lenderfi and owning and they show I can refinance the rental property as follows:
Loan: $470,000 @ 3.25%
Total interest paid after 30 years on $470,000 loan @ 3.25% is $266,369.
Monthly payment: $2,045


So I can lower my monthly payment by adding 8 more years to my loan which adds another (266,369- 204,939) $61,430 in interest expense.


Is my math right?  Would you refinance and put the extra $500/month into the stock market?




You can also ask the lender if they'll adjust the amortization to the term that you want to keep the payoff the same.
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Offline marmott

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Re: RENTAL property refinance
« Reply #2 on: July 21, 2021, 03:32:13 PM »
What about putting the $500 gained towards paying off the loan faster? It probably won’t outperform the stock market but I’m curious how you would go about calculating that option.

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Offline Irvinehomeseeker

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Re: RENTAL property refinance
« Reply #3 on: July 21, 2021, 03:34:31 PM »
Zillow and a few other sites have a refinance calculator that could help evaluate if Refi makes sense.

https://www.zillow.com/mortgage-calculator/refinance-calculator/

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Offline Cares

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Re: RENTAL property refinance
« Reply #4 on: July 21, 2021, 03:39:47 PM »
Yes your math is correct.

If you paid $500 savings towards monthly on new loan your loan would pay off in 257 months (which is close to your remaining 22 years). Total interest paid is $182,482.

Versus paying the remaining 22 years left at the current interest rate you have $204,938 interest remaining. So you would save $22k refinancing and paying $500 extra down.

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Offline marmott

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Re: RENTAL property refinance
« Reply #5 on: July 21, 2021, 03:46:44 PM »
I'm in a similar situation so this is very helpful, thanks Cares!

Offline Cares

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Re: RENTAL property refinance
« Reply #6 on: July 21, 2021, 05:14:40 PM »
I'm in a similar situation so this is very helpful, thanks Cares!

Yea if you PM me your scenarios I can quickly figure it out for you what makes sense. I created my own Excel amortization chart with various different payoff scenarios to compare and contrast loan options.

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Offline Compressed-Village

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Re: RENTAL property refinance
« Reply #7 on: July 21, 2021, 07:24:14 PM »
I have a Rental property with these stats:


Loan: $570,000 @ 3.5%
After 8 years, loan is @ $470,000.
Approximate interest paid after 8 years $146,501
Total interest to be paid after 30 years on a $570,000 loan @ 3.5% is $351,440.
So if I continue paying for 22 more years I will pay (351,440 - 146,501) $204,939 more in interest.
Monthly payment: $2,560


I looked at lenderfi and owning and they show I can refinance the rental property as follows:
Loan: $470,000 @ 3.25%
Total interest paid after 30 years on $470,000 loan @ 3.25% is $266,369.
Monthly payment: $2,045


So I can lower my monthly payment by adding 8 more years to my loan which adds another (266,369- 204,939) $61,430 in interest expense.


Is my math right?  Would you refinance and put the extra $500/month into the stock market?

What I did is not worry about the pay off, rather refi with the lowest rate for the longest because this is a rental.

Keep the cash cushions and invest in a safe liquid positions like, so the risk should very low on this position as you will need it to cover operating expense of this rental.

You are practically getting a free loan with these high ass inflations.

Go long and go strong.

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Offline Cornflakes

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Re: RENTAL property refinance
« Reply #8 on: July 21, 2021, 08:28:05 PM »
Here is some math homework to do:

Today, you are on the hook to pay $2560 a month for next 22 years and you are debt free on the property.
After refi, each month you pay same $2560 = $2045 mortgage + $515 in brokerage account. For next 22 years.

In the brokerage, choose a basket of 5 stocks (coca cola, clorox, P&G, J&J etc. safe and trusted names). Assume 4% annual dividend reinvested each quarter, and 0%, again 0% change in the stock price at the end of 22 years. Project the balance in your brokerage at the end of 22 years. Compare that amount to the payoff amount on the mortgage - do you come out ahead?

If the stocks lost money at the end of 22 years, we all will have bigger problems to worry about at that point than a few thousand dollars lost in the stock market. Chances are those safe stocks will more or less track the market returns. And, you will have 22 years of dollar cost averaging as basis!!

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Offline zubs

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Re: RENTAL property refinance
« Reply #9 on: July 21, 2021, 09:36:10 PM »
Ok thanks for everyone's input.
I'm gonna refi and drop my monthly nut and invest in blue chips....or hookers n blow...we'll see.

I also realize that the extra $500 X 12 = $6,000 / year
and 22 years X 6,000 = $132,000 w/o even doing any investments.


I love the rock hammer concept from Shawshank.






« Last Edit: July 21, 2021, 09:46:54 PM by zubs »

Offline daedalus

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Re: RENTAL property refinance
« Reply #10 on: July 21, 2021, 09:52:28 PM »
Go long and go strong.

That's what she said!

Offline sleepy5136

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Re: RENTAL property refinance
« Reply #11 on: July 21, 2021, 10:32:01 PM »
I've learned that rich people use debt to get richer. So I wouldn't pay any mortgage up earlier unless the interest rate is high which isn't the case in your situation. S&P500 annual returns generally outpace housing besides 2020 and possibly 2021. Keep the debt and throw that extra $500 in the S&P500 each month.

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Offline Cares

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Re: RENTAL property refinance
« Reply #12 on: July 21, 2021, 11:26:15 PM »
Paying off your mortgage or holding your property debt free is for suckers tbh.

Offline hurijo

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Re: RENTAL property refinance
« Reply #13 on: July 22, 2021, 08:20:58 AM »
I'm also looking into refi a rental property. AFAIK, Owning doesn't do rental properties... am I wrong? Any other recommendations? I've heard LenderFi, Interactive Mortgage, Intelliloan thrown around here... remaining loan is only $250k @ 3.5% (30yr), so on the small side.

Offline zovall

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Re: RENTAL property refinance
« Reply #14 on: July 22, 2021, 09:36:40 AM »
Paying off your mortgage or holding your property debt free is for suckers tbh.
I understand the sentiment but people are in all stages of life and that plays a large factor.

 

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