Should I refinance our rental property at a lower rate and put monthly savings into 401k (employer matches)?

I had originally posted this question under “Renting and Real Estate”, but the circumstances have changed.

I’ve inherited $ 40k and trying to see what the best use is for it. I have a small rental property that was valued at $ 435k in 2007 when I took out cash to make down payment on our current house. I refinanced $ 344k on the rental at 6.625%. I have an opportunity to refi it at 5.25% which will cost 3.375 discount points/origination fee and other closing cost. However, most current bank appraisal for this property came in at $ 355k which means I need to come up with about $ 65k (borrow $ 25k at 4.5% from HELOC) to close the loan. Current mortgage balance on the rental is $ 336k. Based on a simple calculation, I will save about $ 615/month and about 2 years to recoup all of the closing costs to breakeven.

Does it make sense to refinance our rental property, use my inherited $ 40k and borrow $ 25k from HELOC, save ~ $ 7,380/year on rental mortgage and set aside part of the savings into my 401k (employer matches)? Of course, I’ll be making monthly payments to payoff the borrowed $ 25k HELOC.

Register New Account
Reset Password