Duplex #1
One property was valued at $134K, which was higher than I anticipated. I purchased it in 2008 for $130K, but when I got it appraised to try to refinance it in 2010 it was valued at $118K. I was prepared to pay the balance down a bit in order to refinance if necessary, but with a $134K value that won't be necessary - I can lower my rate from 6.79% to 5.00% and come to close with only the closing costs!
I still have to pay those out of pocket because the LTV maximum has dropped from 80% when I originated my mortgage to 75% today if you want the best rates. So despite a value increase there's not enough room to roll in all the closing costs.
Duplex #2
The news was pretty grim on the other property I got appraised - so grim that I almost don't buy it. I purchased it in 2008 for $219,900 - which is what the builder sold each home on that street for between 2007 and 2008. Several of the properties went to investors though, so during the crisis a few went into foreclosure or were dumped via short sales, which brought down the comps in the area. In 2010 I bought an identical property across the street for $165K out of foreclosure. I thought I was getting a great deal on that one - especially since the properties cash flow based on the $220K price and higher debt service that goes with that.
But the recent appraisal just came back at $140K. I have to say that is way below what I've even seen anything listed for on that street - including foreclosures and short sales. They must have taken a recent comp for a foreclosure from a nearby area that shot the value down or something. If you use the "income approach" to valuation the homes are worth over $200K based on current rents anyway.
My mortgage on the property is $169K so I'd have to pay the loan down by about $65K in order to refinance it. My payment would drop by over $7K per year if I did that, but I am just not sure I'm comfortable putting all that money into the property.
In summary
I'm closing on the refi of Duplex #1 Monday and am very excited. My payment will drop from $666 to $532 so my cash flow will improve by over $1500 a year on that property, which is not insignificant. I'm holding off on the other property. I may get it reappraised next year and see if I can get a higher value and refinance then.
Or I may use some cash to pay it down anyway and enjoy the extra $7100 that would come into my pocket. My trust would go from $150K to about $80K, but my debt balances would decrease and my monthly debt service would plummet. My DTI would drop which would help me when/if I buy a new home or apply for any other loan. Plus it would move funds from my trust into my own control - my uncle won't invest the cash and he'll only approve distributions for real estate aquisitions or debt repayment, so my only options are really to leave those funds in cash, buy a new home or rental, or pay down this loan to refinance at a much lower rate.
What would you do?
What do you think I should do?
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