I got a call from my mortgage broker this week. He’s one of those guys you love to have on your team. He’ll make something work that 10 others didn’t. I’ve have an opportunity to refi on all three of my properties (my house included) and reduce my mortgage payments by $328/mo. I’ve been trying to take advantage of these rates for months.

I have one loan through his office (he underwrites his own loans). He is able to refi this one with minimal costs. Paul wisely takes the conservative approach and has his loans meet criteria so he can sell the notes if need be, but it allows him much greater flexibility. The other two will require a complete loan package. He gave me worst case scenario for refi costs. He has to in order to prevent him from making up the difference in case the worst case hits.

Total closing costs $5723 that I bring to the table. That’s a big chunk of change, but I won’t have to make 3 mortgage payments for each month I refi. That’s a savings of $2173 bringing the out of pocket cost down to $3550. That can be recovered in 13 months. In my calculations I must add in the added loan balance of all three of $5691. Also assume $500 appraisal each for 2 properties. The loan with his company won’t need an appraisal. Combined cost of $10214. Divide that out by $328 results 31 month payoff. So to bring it all together.

Closing. . . . . . . .+5723
Added balance. . .+5691
2 appraisals. . . . .+1000
Saved Payments. -2173

Total. . . . . . . . . 10241

Total cost / savings per month (10241/328 = 31 months).

Now my wife and I need to decide whether that fits into our long term plan for these rentals. The downside is obviously the upfront costs and potential of selling the properties before the break even point. The benefit is the much increased cashflow and the long term savings potential on these properties. This would coincide with the recent decrease in payments because the mortgage companies over charged me in escrow. I had $72 reduction in payments this last month. This is mostly due to reduction in taxes due to lost property value in the area. Still, I will have a combined reduction in payments of $400. That is huge.

I will also be increasing rent on my sec 8 property by $30 to Sec allowed rent, the other property will see a rent increase of $50 in October. I have held that rent steady for 2 years. $480 increase in cashflow will be very nice. That will all go back into the properties in either savings, principle or upgrades.

Enough rambling. Just thought I would share my thought process on calculating this decision.

I’ll leave you with this quote, “Progress always involves risks. You can’t steal second base and keep your foot on first.” ~Frederick B. Wilcox