Remember when I talked about combining the loans on the rental property into one?
With the offer from my HELOC lender, I was able to accomplish the very same result without all the hassle of going through a refi.
I didn't have to worry about the stricter lending guidelines for investment property. I didn't have to prove that the property is producing monthly income. I didn't have to accept a higher interest rate that most investment properties come with. And the setup fee for the loan conversion was only $100 instead of $2-3K that would have been inevitable with a traditional refinance.
The major bulk of my mother-in-law's estate was distributed in mid-November. My husband and I agreed that we would use $38,739.46 of his distribution to pay down on the rental property loans.
So we used the $38,739.46 by sending $26,133.27 to pay off the First Mortgage and sent $12,606.19 to the HELOC.
Let me tell you, when I call Bank of America to check the balance, that was the sweetest automated message I ever heard when the computer said, "Your loan has been paid in full." Look at this pretty ticker now! *BIG SMILE*
And here is what the HELOC looks like after adding the $100 fee:
Then I had the HELOC lender convert $73,000 of the balance to a 4.99% fixed rate amortized over 180 months. The monthly payment will be approximately $577.00. The other option was to set it up on a 10 yr. loan with a payment of $773.92. My intention is to make monthly payments of $774 based on the 10-year amortization. The property will cash flow with the $774 payment assuming the only other expenses I have each month are association dues, insurance and real estate taxes. But I like the flexibility of having a lower payment if there are months that I am between tenants, have major repairs, etc.
I'm still not sure what direction we'll go in with this property. Depending on what our current tenants decide to do at the end of their lease and depending on real estate market recovery, we might decide to put it back up for sale. If we do, we haven't invested much into getting these new loan terms put in place.
If we keep it and are able to pay it off in 10 years, it would be a nice little source of college funding when my 2nd grader is looking at college tuition in the year 2020.
Either way, I am so happy with this loan. If I have to be in debt, at least I now know that the interest rate is fixed and the payment is affordable. Oh! and don't forget the $500 Visa gift card reward the HELOC lender is giving me in a month or two!
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