You will need a finance calculator… - Posted by Soapymac
Posted by Soapymac on October 29, 1998 at 15:18:44:
to figure this out, but the first question about doing a refi is whether or not it makes sense to do so.
Does your monthly income from the renters (even if you are one of them) pay all your operating costs to own the duplex? (I’m thinking that you should have a zero or slightly positive cash flow RIGHT NOW.)
If you do not, do not refi…it would only make things worse for your lifestyle.
Would the property appraise at the amount of the refi? Again, if it does not, do not refi.
Let’s take the other side of this, also. Let’s say that the property gross income supports the property financials AND gives you positive cash flow.
Then the two questions you should answer are:
- If you refi to a lower rate, would your positive cash flow cover the costs of the refi for the first 2 1/2 years?
If it will, then you should consider it, because after gaining back your refi costs your finance costs are less, hence positive cash flow will be greater.
- Are you planning on keeping this duplex long enough to capture back your refi costs, which I am “guesstimating” at 2 1/2 years?
If you do not plan doing that, do not refi.
This is just one man’s opinion, so I will allow myself to be educated right along with you.