Posted on: 27th Jan, 2008 01:48 am
hi everyone,
my first post to this forum. i'll spill out everything i thnk is relevant. forgive the info overload! i wanted to get all out on the table upfront without need for posting tag.
facts:
(1) we have three investment homes, all with different mortgages and rates: $194k on 30yr fr @7.0% w/ ltv 81%, pni $1317, rent $1025, pmi of $150/mo; $187k in year two of 5/1 io arm @7.475% e/ltv 69%, pni $1696, rent $1100, no pmi; $130k in year two of 10/1 arm w/ltv 69%; pni $1131, rent $825, no pmi.
(2) we are in the process of refinancing all to 30 year fixed rate loans. we locked in rates of 5.91%, 5.579% and 5.957% respectively. if the refinancing goes through, we will free up $1180 extra cash flow and rents would then pay 98% of p&i. with favorable appraisal, we would also get rid of pmi on the third house.
(3) our primary residence has a 30 year fr loan already at 5.5% (in the mid of 3rd year with $294k balance) with a modest heloc attached to it (balance now at 18k @ 7.25%). ltv is about 75%. we are renting the primary residence (temporarily away for job). rent is $1100, pni is $1726. we have not (yet)attempted to refinance the primary. we are paying the heloc down slowly at $300/month.
(4) we generate enough income to cover gaps and have enjoyed the tax break on $25k of shortfall.
(5) personal: we are approaching middle age (early 40s) and have young kids (10, 8, 3).
(6) all homes are owned jointly in both names
objectives:
(1) we want to get the investment properties to become self-sufficient. we want rental properties to go beyond p&i to cover all costs (with refi, rents would cover 77% of true costs).
(2) we also want that these homes to eventually generate cash flow to cover the p&i ($1726/mo) on the primary residence and other costs $350/mo). together with (1), we would like to get to the stage of not having to think at all about housing expenses.
(3) in retirement, we wish that these three homes generate income for us and our kids (and grandkids?)
(4) with 3-5 years, we want to remodel the primary residence to accomodate our family of five. we figure that will cost $100k-$150k, but we don;t really know.
(5) we would like to keep all homes for 25 years or so.
(6) when we return home, we wish to pursue a relaxed lifestyle (far more than we have had)
(7) all else equal we would rather own the homes sooner rather than later.
questions
(1) a bit of water under the bridge, but is the move to get all loans 30year fixed a smart one? what would have been an alternative/alternatives?
(2) what are ways to manage the loans once we have them, given facts and objectives? i know an extra payment a month will shrink the live of the loan by 5-7 years. are there other strategies?
(3) any suggestions on what we should consider with the loans going forward or down the line?
(4) any suggestions on how we have set up ownership?
(5) any other suggestions, red flags, caveats, etc. that might improve the realisation of our objectives?
i am looking forward to any and all advice, criticism and comments. we are learning by doing and i am sure i can learn from the expertise and experience on this board.
nik
my first post to this forum. i'll spill out everything i thnk is relevant. forgive the info overload! i wanted to get all out on the table upfront without need for posting tag.
facts:
(1) we have three investment homes, all with different mortgages and rates: $194k on 30yr fr @7.0% w/ ltv 81%, pni $1317, rent $1025, pmi of $150/mo; $187k in year two of 5/1 io arm @7.475% e/ltv 69%, pni $1696, rent $1100, no pmi; $130k in year two of 10/1 arm w/ltv 69%; pni $1131, rent $825, no pmi.
(2) we are in the process of refinancing all to 30 year fixed rate loans. we locked in rates of 5.91%, 5.579% and 5.957% respectively. if the refinancing goes through, we will free up $1180 extra cash flow and rents would then pay 98% of p&i. with favorable appraisal, we would also get rid of pmi on the third house.
(3) our primary residence has a 30 year fr loan already at 5.5% (in the mid of 3rd year with $294k balance) with a modest heloc attached to it (balance now at 18k @ 7.25%). ltv is about 75%. we are renting the primary residence (temporarily away for job). rent is $1100, pni is $1726. we have not (yet)attempted to refinance the primary. we are paying the heloc down slowly at $300/month.
(4) we generate enough income to cover gaps and have enjoyed the tax break on $25k of shortfall.
(5) personal: we are approaching middle age (early 40s) and have young kids (10, 8, 3).
(6) all homes are owned jointly in both names
objectives:
(1) we want to get the investment properties to become self-sufficient. we want rental properties to go beyond p&i to cover all costs (with refi, rents would cover 77% of true costs).
(2) we also want that these homes to eventually generate cash flow to cover the p&i ($1726/mo) on the primary residence and other costs $350/mo). together with (1), we would like to get to the stage of not having to think at all about housing expenses.
(3) in retirement, we wish that these three homes generate income for us and our kids (and grandkids?)
(4) with 3-5 years, we want to remodel the primary residence to accomodate our family of five. we figure that will cost $100k-$150k, but we don;t really know.
(5) we would like to keep all homes for 25 years or so.
(6) when we return home, we wish to pursue a relaxed lifestyle (far more than we have had)
(7) all else equal we would rather own the homes sooner rather than later.
questions
(1) a bit of water under the bridge, but is the move to get all loans 30year fixed a smart one? what would have been an alternative/alternatives?
(2) what are ways to manage the loans once we have them, given facts and objectives? i know an extra payment a month will shrink the live of the loan by 5-7 years. are there other strategies?
(3) any suggestions on what we should consider with the loans going forward or down the line?
(4) any suggestions on how we have set up ownership?
(5) any other suggestions, red flags, caveats, etc. that might improve the realisation of our objectives?
i am looking forward to any and all advice, criticism and comments. we are learning by doing and i am sure i can learn from the expertise and experience on this board.
nik
Hi and welcome to the mortgage forum, great to have your here, what a great lengthy post. I am sure that someone will be along shortly to break this all down and help you out.
Hi Nik,
Welcome to forums.
What I understand from your post is, you have 4 mortgages in all – 2 on your primary residence and 2 on investment properties respectively. If you consider refinancing all 3 first mortgages (having priority over any other loan on the home) on your primary residence and investment properties, then it will result in huge payments till a long period of time. I mean ok you have the financial situation now to think of paying 3-4 loans at a time but it may not be easy when you near your retirement even though you have rent payments to make use of.
If you can at least combine 2 loans and then refinance into one, then your first mortgages would be 3 in number. Moreover, you have a Heloc too on the primary home. So, if you can do a cash-out refinance combining both ARMs, then perhaps you would get a good amount of cash to pay off the Heloc.
The market right now is favorable for fixed rate loans as the prevailing rates are low. Even for 1 year ARMs, rates are reasonable. But considering the fact that you have a number of loans to manage, I would suggest that you can go for 30 year loan while refinancing the ARMs combined together and the 30 year loan which was offered at 7%.
I hope I could help you. If you have further queries, feel free to do so.
Thanks
Welcome to forums.
What I understand from your post is, you have 4 mortgages in all – 2 on your primary residence and 2 on investment properties respectively. If you consider refinancing all 3 first mortgages (having priority over any other loan on the home) on your primary residence and investment properties, then it will result in huge payments till a long period of time. I mean ok you have the financial situation now to think of paying 3-4 loans at a time but it may not be easy when you near your retirement even though you have rent payments to make use of.
If you can at least combine 2 loans and then refinance into one, then your first mortgages would be 3 in number. Moreover, you have a Heloc too on the primary home. So, if you can do a cash-out refinance combining both ARMs, then perhaps you would get a good amount of cash to pay off the Heloc.
The market right now is favorable for fixed rate loans as the prevailing rates are low. Even for 1 year ARMs, rates are reasonable. But considering the fact that you have a number of loans to manage, I would suggest that you can go for 30 year loan while refinancing the ARMs combined together and the 30 year loan which was offered at 7%.
I hope I could help you. If you have further queries, feel free to do so.
Thanks