Refinance DILEMMA!!

Hello everyone we are new to this site and need some help.
ARM just kicked in and my intro rate of 5.2% is over.

We own a Duplex in Oakland ca. We live in one unit and rent the other. We want to Move out to my next investment property. I and my wife can afford about a $3,500 mortgage, if we move out. We want to fix up and live in our next property.

Here are some facts:
Total rents (when we move out) would be $2,500.
My monthly tax and insurance payments are $300.
We owe 300K and my interest rate is 7.35% as of today.
Property appraised at 535K
Need 25K for repairs on roof, landscape and our unit.
I have a dilemma.

Should we Refinance only 300K + 25K for repairs only and keep the slightly positive cash flow? What type of loan should we get? We had originally thought of an interest only loan for 5-10yrs.


Should I max out my LTV and pull out a loan of 429K and pocket about 113K (after paying off credit cards). Interest only 10yr loan, 30yr total.
Use that:
$113,000 cash out
25,000 repairs
- 60,000 10%down payment on next investment
28,000K left for fixing up next investment
This would cause a $550 negative cash flow! So the difference between these two scenarios is $550 a month for 10 years. at least until the new payments take effect.

Need help from experienced people. I do not want to dig myself into the ground. Please any ideas would definitely go into consideration. If you need any more info just ask.

Thank you very much.
Paul & Erika

As you currently occupy this property, any consideration to refinancing should be done before occupancy changes.

With this said, what is your exit strategy—it sounds like you intend to hold the property…

It’s easy to answer this type of question by asking yourself, “what is the worst case scenario and can I live with it”?

For example, what if you did a max. cash out (and admittedly created a neg cash flow) and the property value declines as well (and you are now upside down and in the red)—short of an act of God not covered by an insurance company, this would be worst case scenario…

Can you live with it and for how long?

I don’t have enough info to make any decision, but hopefully I’ve given you enough to think about to do it on your own.


Scott Miller


Scott Miller

I would suggest doing something right in the middle of your two options your considering, would not recommend maxing out on the property.

Dont forget that when you refinance an owner occupied property that you sign an occupancy affidavit saying you intend to occupy the property as your primary residence.