My wife and I bought a new house (with a 2br mortgage helper) in Victoria for 607k and we were counting on selling our existing house and using the equity (approx. 280k) to pay down on it. But with our March 31st closing date looming ahead and no offers on our house, we are now thinking about renting our existing home. We already have a rental property that has a small positive cash flow. We`ve been given the advise below on how to structure the rental of our home but worry that it will become a negative cash flow property. We would greatly appreciate any feeback on this and/or other possible ideas!
"I have worked the numbers and my first thought would be to refinance your existing home to around 80% of the value – (80% of $530,000) so $424,000. This would give you an extra $180K or so. With this money I would suggest paying off any unsecured debt (like line of credit and credit cards), then using the remainder for closing costs and the down payment for you new home (at least 20% down on 607,000, so $121,400). To make things “cash-flow”, I would say to extend the amortization to 40 years on your existing home and at a blended rate your payments would be around $2130 of the $424,000. You would then have a mortgage of $485,600 (or less) on your new home and payments on a 40 year amortization would be around $2650. In this instance we would leave your existing rental property “as is”, and maybe look to do something when the mortgage comes up for renewal in November 2008."
Thanks - Speedy.
"I have worked the numbers and my first thought would be to refinance your existing home to around 80% of the value – (80% of $530,000) so $424,000. This would give you an extra $180K or so. With this money I would suggest paying off any unsecured debt (like line of credit and credit cards), then using the remainder for closing costs and the down payment for you new home (at least 20% down on 607,000, so $121,400). To make things “cash-flow”, I would say to extend the amortization to 40 years on your existing home and at a blended rate your payments would be around $2130 of the $424,000. You would then have a mortgage of $485,600 (or less) on your new home and payments on a 40 year amortization would be around $2650. In this instance we would leave your existing rental property “as is”, and maybe look to do something when the mortgage comes up for renewal in November 2008."
Thanks - Speedy.