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The DFY Blog

What Is the New Refinance Strategy That Is Making Big Waves?

Posted by Kevin Clayson Monday, 4 May, 2020

Have you been wondering if you could save money with a mortgage refinance or maybe even increase cash flow on an investment property in the current interest rate environment?

There is a new mortgage refinance strategy that is making some big waves in light of historically low interest rates. You’ve heard of rate and term refinances and cash-out refinances, but ROI or Return On Investment Refinances have arrived, and we’ve got a short video that will break it all down for you.

You’re likely familiar with the terms cash-out refinance or rate and term refinance, but what about the term ROI refinance, or Return on your Investment Refinance?

Here is how it works: Imagine you could do a refinance that would cost $10,000 but would save you $227 a month… would it make sense? It depends on a few things, but here is one of the most critical aspects… will it provide you a substantial “return on investment?”

Instead of the refinance COSTING $10,000, what if you viewed it not as a COST but as an INVESTMENT. If you “invested” $10,000 in a refinance (or in this case invested $10,000 in an increased loan balance) that lowered your payment by $227 a month or $2724 a year, you would be earning a 27% return. In fact, YOU just gamed the system and beat your bank at their own game by earning a 27% return on the money they are lending you at 3.75%. To say it another way, with this refinance you would be putting $227 extra dollars in your pocket every month, for an investment (in increased loan balance only) of $10,000. If you use your new annual gain of $2724 and divide against your investment of $10,000, your return on investment is 27%. That’s a TWENTY-SEVEN PERCENT RETURN on investment!

If I told you you could borrow someone else’s money at 3.75% and invest it in a vehicle that would yield 27% how excited would you be? That is arbitrage at it’s finest, and you would have all your friends and family coming to you for shrewd financial advice… heck, you might finally feel like you beat the house (aka The Bank) at their own game, instead of them always seeming to beat you.

Want to learn more? Watch the video below and please give us a call if you have any questions.