7%->5.5% ->3.37%: The Case For Refinancing

I’ve owned 3 homes and still have 2 of them: 1 is a primary residence with my husband. The other is a rental property that I bought as my primary residence before I met my husband.

The 3rd one? It’s really the 1st one: My very first home. It was with my ex-husband, just 7 months after we were married in August 1994. Neither of us really had any idea what we were doing with respect to financing.

We had an ARM! But it was 1995, so this was quite awhile before we would have gotten into trouble with an ARM due to any glitches with home values.  However, I think about how if we had been in a different time buying that house with an ARM….ayyyyy.

May not have turned out so well.

I gave him the house when we divorced, as I knew I’d be okay financially and that I would be able to buy my own place again in a couple years (which I did…..just 1 1/2 years after the divorce I closed on my own house). Anyway, we bought that house at $170,000 in Spring 1995, and it is now worth over $500,000. Not bad, and, as he told me a few years ago ‘It’s like my 401(k)’.

The house I bought in 1999 (which is now the rental property) closed with a fixed (yes, I had learned by then not to do an ARM) rate of 7.0%. Of course in May 1999 I thought this was pretty good.  May 1999 had Treasury bonds in excess of 7%! It was a different world, wasn’t it?

We (yes, no longer an I, was a we again Spring 2000) refinanced it in 2003 and got a rate of 5.5%. Wow I thought, that’s such a good rate!

Well, it’s been a while since then, and you don’t need me to tell you what’s happened to real estate since then, specifically financing options for investment property.

Let’s just say the well’s been dry a good long time and only recently have rates again been compelling for our rental property to make it worthwhile to refinance.

When we refinanced our primary residence to 4.13% for a 20 year fixed 2 years ago, I tried getting the rental property refinanced, but it was a no go due to all the activity in refis at that time, and the rate for investment properties still wasn’t attractive.

So I thought the timing might be right earlier this summer. I contacted our credit union and sure enough, the spigots have opened for investment property refis.

So much so that when I heard the rate I couldn’t quite grasp it:  3.37% for a 20 year fixed.

We signed the papers this morning and I am pretty happy about it.  The rental property started out when I bought it in May 1999 with 7.0% fixed. Then 5.5% fixed with a 2003 refi.

Now, with a 20 year 3.37% I am quite giddy.

The credit union even threw in a $400 credit for being former MSFTies (we are both former MSFT).

I call that a good Monday, and it leads me to quite emphatically state that if you have investment property and haven’t refinanced it in a few years or longer, now is the time to pick that back up again as a project and explore what the rates might be for you. I have found rates at credit unions to be better than the larger financial institutions, so definitely consider becoming a member of a credit union in your industry to see what rates might apply to you (this would also apply to other financing needs such as car loans and HELOCs)

At 3.37% for a 20 year fixed, it wasn’t a hard decision for us to reach.

7%->5.5%->3.37% is a direction I am definitely in favour of.