3 Ways of Thinking About Choosing the Right Time to Refinance

Is now a good time to refi, should you wait? It's an important question to get right. In this episode, we discuss our approaches to assessing what needs to be in order to refinance a property with a desirable result. --- Transcript   Emil: Welcome back for another weekend wisdom episode of The Remote Real Estate Investor. My name is Emil Shour. And today I've got,   Tom: Tom Schneider   Michael: and Michael album.   Emil: And we are going to be talking about when is the right time to refi a property, whether it's an investment property, or even your personal residence. So let's hop into this topic.   Alright guys, so important question when to refi. There's obviously, yesterday, yesterday and last night yesterday, today, today, I actually refi every single month alone just keeps going up. But I keep refining. So it's all good. There's advantageous times to refi and less advantageous times refi. And sometimes, you know, you can grapple with Oh, is now the right time. Should I wait. So let's talk about when you guys have personally reified. any examples you want to start with?   Michael: Go ahead, Tom.   Tom: Go ahead. Michael, you hit the buzzer first, I saw you hit!   Michael: A nice gentle nudge back! So I recently reified my primary residence, I did a rate and term only refi. We didn't do a cash out because the rate would have gone up quite a bit. So we were able to get down I think a full percentage point for basically free as they call it. So I just paid like escrow and closing escrow and title fees. That was like, I don't know, 1200 bucks. And I think I saved 150 a month was doing that. So that was kind of a no brainer in terms of cost to pay back benefit.   And so we just saw rates going down like crazy. And so yeah, let's jump on it. So did a refinance. If I had been able to, I would have absolutely done a cash out refi. Because basically, so I'll just I'll put it out there for everybody. So we were at a 3.875 when we bought our place like two years ago, just over two years ago, which was great at the time, we were super thrilled with that rate. And then COVID, hidden rates started plummeting. And so we locked in a 2.875 on our primary. And so the cool thing is that we've talked about it on prior episodes, that investment property rates on loans traditionally, are about 1%, spread higher than your owner occupant rate. And so what's really great to do is if someone has a lot of equity in their home and their primary, they can do a cash out refinance, borrow money at a much lower rate, and then use that money to invest as opposed to somebody else who's has an investment property with a lot of equity, they do a cash out refi, that rate is that money is going to be at a higher interest rate. And so it doesn't go as far your purchasing power is a little bit diminished.   But again, I didn't do it wasn't an option for us. So we didn't do that. But if I could have I absolutely would have.   Tom: So was it a strictly a rate decision? Like once the rate got to a syllabus certain level you're like?   Michael: Exactly, yeah, so they got to certain levels, we pulled the trigger, I was in contact with that same lender, and actually rates had dropped again. And so we were going to jump on it and do another one down to like two and a half. But then by the time we got around to doing it, then rates had tick back up. So that wasn't really a feasible option anymore. So we're still at a .2875, which is still great, very happy with that rate. Of course, less is better. But it just has to make sense. And so we could get down to a 2.75. But for the 1200 bucks, that's like I don't know, 12 bucks a month savings. So it just wouldn't really make sense for us at this point in time.   Emil: So for anyone who's done a refi or just got a loan, you know, loans aren't free, refunds aren't free. So typically one or two things happen. Either you pay up front to do the refi, you pay all the costs, or they roll it into your loan value, and no