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Should I Refinance My Rent House?

Discussion in 'BBS Hangout' started by ima_drummer2k, Sep 18, 2014.

  1. ima_drummer2k

    ima_drummer2k Contributing Member

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    Wells Fargo has been calling and sending me letters non-stop offering me a lower interest rate, lower monthly payment, and no closing cost refinance.

    I've always heard that you shouldn't refinance unless you plan on staying in the house for a long time (in this case, keeping my rental house). I'm still not sure if I want to do that or not.

    Plus, I'm a little skeptical about the no closing costs. Is that something banks are really offering right now? What's in it for them if there are really no closing costs?

    Right now, I'm just about breaking even every month if you factor in:

    Rent income = mortgage payment + insurance + property taxes

    If I refinanced, and there were TRULY no closing costs, I would be coming out ahead every month and it might be worth it to keep the house for the foreseeable future. But if I have to pay any money up front, then it wouldn't be worth it, since my margins are so tight.

    Thoughts?
     
  2. REEKO_HTOWN

    REEKO_HTOWN I'm Rich Biiiiaaatch!

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    My guess is this is HARP?

    I see no problem with it. You save money and can still charge the same in rent.
     
  3. HR Dept

    HR Dept Contributing Member

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    Not sure about refinancing. But I recently pre-qualified for a 15 year mortgage w/ 3% down, 4.836% and zero closing costs at my credit union, Shell FCU. Though there was a $750 "Origination Charge" that they would've tagged on to the down payment. We decided not to buy, but offers like that do exist I guess.
     
  4. Surfguy

    Surfguy Contributing Member

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    I did it (on my own home...not a rental), yes it referred to HARP in the offer was to why I was getting the offer to refinance at a lower rate, and I did not have any closing or other costs like they said I wouldn't. It was just basically setting up a new loan under the better rate to replace the existing loan.

    I don't see what refinancing and how long you will keep the house has to do with anything in this case given it is a free refinance. I've heard that when buying a home where you take a mortage loan with actual closing costs.
     
    #4 Surfguy, Sep 18, 2014
    Last edited: Sep 18, 2014
  5. SwoLy-D

    SwoLy-D Contributing Member

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  6. CrazyDave

    CrazyDave Contributing Member

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    No cost just means nothing out of pocket. There will be fees that they roll into the refinance. If it is a HARP you may qualify for no appraisal among other things, not to mention not needing escrow up front if you are refinancing through the same company your current mortgage is with.

    Basic rule of thumb I've been taught is if you aren't going to keep it for 5 years, it's not worth the costs, though that might be adjustable if you qualify for no appraisal. It would also depend on what your current rate is vs. the rate you can get.

    I just went through all this, and due to special circumstances, it was a complete pain in the ass, but still got a much better rate, and I do plan to keep the home for 5+ years, so....
     
  7. Classic

    Classic Member

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    yeah, no costs my ass: except the new title insurance policy that is like $1500 and the escrow pre-fund you have to come up with[12 months insurance and pro-rata taxes]...or, you just roll it into the new note for the luxury of missing one payment

    probably not worth it when you get down to it
     
  8. CrazyDave

    CrazyDave Contributing Member

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    Generally I'm told the 5 year rule of thumb applies to getting 1 full point lower on your rate. Depending on your current rate, you might could do better than that, making that rule of thumb time frame egregious, but you'd have to do the math to know where your break even point would be for that.
     
  9. Dubious

    Dubious Contributing Member

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    Are the refi charges tax deductible on rental property?

    It would only make a small difference anyway, but....
     
  10. Surfguy

    Surfguy Contributing Member

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    I know there were no fees and no appraisal on mine anyway using same bank as my original loan.
     
    #10 Surfguy, Sep 18, 2014
    Last edited: Sep 18, 2014
  11. juicystream

    juicystream Contributing Member

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    Generally amortized over the life of the loan.

    Yes, you can have a loan with no closing costs because the lender will cover the charges. That doesn't mean that is what they are offering you though. Just call and ask them.

    Anyways, the reason why you only refinance if you plan on keeping the property is because the interest savings need to be greater than the refinancing costs.
     

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