I realize this sounds bad, but hear me out. I currently own two properties (A and B) which I rent out. I do not own my primary residence.
Property A has a 15 year mortgage at 3.25%. I'm happy with this loan.
Property B has a loan with essentially two periods. 1) a 7 year interest-only period at 6.75%. 2) a 23 year payoff period with a variable rate. This loan need to be refinanced.
The problem is that Property B is underwater. It's worth ~360K and I owe ~388K.
So, one thought I had is this: if I could get a 100K loan, I could put that 100K into Property B and re-fi into a conventional loan with a favorable interest rate. I could take the savings in the interest payment (~$800 - $1,000 per month by my calculation) to pay down the 100K loan.
Assuming my assumptions above are correct, what am I not thinking about? Here's what I can think of:
- I probably need to put something up as collateral for the 100K loan. I could use Property A. (The appraised value should be 100K or greater than what I owe.)
- My the percent of what my debt payments (two mortgages plus rent plus 1K/mo on the 100K loan) are compared to my income (job plus rental income) would be 46%. This is probably too high.
Am I crazy? Do people do stuff like this? Is there an easier way? Is this a horrible idea?